Ahead Today
G3: US-China trade talks
Asia: Indonesia Foreign Reserves
Market Highlights
The Asia export numbers for May provide 3 interesting takeaways. First, there was continued negative impact to China’s direct exports to the US from previously astronomically high tariffs, even as overall exports by China have been reasonably resilient. Second, it showcased further evidence of front-loading of exports during the Liberation Day tariff pause, including among the likes of Vietnam and Taiwan, and to a smaller extent South Korea. For Vietnam in particular, the front-loading effect is corroborated as well by strong imports from China, and with the rise in Vietnam’s exports and imports most concentrated in the electronics sector. Lastly, the data showed meaningful dispersion of export outcomes, with significant outperformance in Taiwan’s exports showcasing its dominance and competitiveness in the AI chip space. The strong pickup in Taiwan’s exports, the rise in Taiwan’s FX reserves by more than US$10bn in May, coupled with anecdotal evidence of exporter USD conversion helps to explain at least part of the sharp 10% appreciation in TWD seen last month.

Of course, these datapoints are backward looking, and the key for markets is the path forward. The latest indicators including forward bookings from the Port of LA and feedback from logistics companies suggest there should be an increase in China’s exports to the US and likely from the 2H of June, and this is also corroborated by a rise in container freight rates. Meanwhile, the best leading indicators we like to track for Asia’s exports including metal prices continue to point to a moderation in exports in 2H, although the extent of the expected slowdown seems to have tapered off somewhat post the US-China tariff pause.
Regional FX
Global markets and Asian FX were generally mixed and range bound, and awaiting the outcomes from the US-China tariff talks that are happening right now, the focus of which is likely to be on rare earth exports coupled with export controls from the US side. Latest indications suggest that talks between both sides will continue into a second day, with the US delegation led by Treasury Secretary Scott Bessent with Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer. The Chinese delegation is led by Vice Premier He Lifeng. The US signalled a willingness to remove restrictions on some tech exports in exchange for assurances that China is easing limits on rare earth shipments.


