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Moody's: US-China tensions herald spillover effects in Asia

Trade turbulence between the U.S. and China will threaten trade and economic stability in Asia, according to a report by Moody's Investors Service.

The sectors most vulnerable to an escalation of the trade spat between the world's two largest economies are computers, electronics and machinery. Spillover effects are predominantly focused on exports of intermediate and capital goods to China via integrated supply chains, the agency said.

Nevertheless, some countries and sectors in the region will benefit from the diversion of imports from China, as firms begin to eye Taiwan and Korea for electronic components, and Vietnam and Malaysia for semiconductor devices.

"However, if the additional U.S. tariffs trigger a gradual trade rerouting by Chinese consumer goods exporters to other Asian markets, domestic producers in those markets with greater local exposure and more replaceable products would likely face increased competition," said George Xu, a credit analyst at Moody's.

China on Sept. 13 announced tariff exemptions on some U.S. agricultural products after U.S. President Donald Trump on Sept. 11 decided to delay additional tariffs on China as a gesture of goodwill. The two countries are scheduled to hold face-to-face trade negotiations in October.