Credit conditions in Asia Pacific are facing increasing downward pressure due to the significant escalation in trade tensions between the US and China, S&P Global Ratings said in a Tuesday release.
Trade friction dampens growth and confidence, while ongoing market volatility and tighter financing further squeeze liquidity, according to S&P head of Asia-Pacific credit research Eunice Tan.
Although a 90-day suspension on certain US tariff hikes offers some breathing room, the region remains vulnerable given its deep trade integration with both major economies, Tan said.
Continued tariff tension will weaken global trade, mainly affecting export-focused manufacturers and smaller economies, the rating agency said.
Furthermore, China's growth is eroding as tariffs impact export competitiveness and domestic real estate challenges continue, S&P said.
The uncertainty contributes to broader contagion risk, leading to risk aversion, higher risk premium, and potentially restricted access to capital even for higher-rated entities, according to the rating agency.
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