Business are cancelling Asia investment as US-China trade war deepens

The US-China trade war is weighing more heavily on businesses operating in Asia Pacific, with companies reporting more delays or cancellation of investments than last year.

The impact on investment was cited by 54% of firms surveyed by the American Chamber of Commerce in Singapore, up from 50% late in 2018, it said in a report on Wednesday. More businesses than last year are also considering readjusting supply chains away from China and the US.

Over the past six months, 41% have seen a “slight” negative impact from the trade war, and 8% registered “strong” negative, while 32% reported no impact. Forty percent see the trade war deteriorating further, with 30% each saying it’ll stay the same or be resolved soon.

The survey results cast a darker picture for the U.S.-China trade war on the eve of a scheduled meeting between Presidents Donald Trump and Xi Jinping on the sidelines of Group of 20 meetings in Osaka, Japan. While investors pin hopes on some easing in friction between the two economies, they are looking at possible worst-case scenarios, including a potential 25% U.S. hike on $300 billion in Chinese goods.

The AmCham survey included 144 respondents, around 90% of which have operations either globally, across the Asia-Pacific, or across Southeast Asia. American-based firms made up 61% of all respondents, and manufacturing businesses had a 22% share.

There were some silver linings in the survey. Vietnam was heralded as a trade-war winner amid rising tariff tensions, offering a high-growth, low-cost environment for businesses to shift orders and production. The AmCham survey cited respondents looking at a potential manufacturing shift toward India.

And respondents still see a favorable business outlook over the next six months, with 88% seeing Southeast Asia as a more or equally attractive place to do business compared with other regions. That share is up from 75% last year.