KUALA LUMPUR (Jan 25): The recently-approved new safeguard tariffs on imported large residential washing machines and solar panels by US president Donald Trump may negatively impact the credit profiles of trade-reliant Asian manufacturers, said Moody’s.

“If these measures represent one step in a series of protectionist trade policy decisions by the US, possibly resulting in retaliatory action by other countries, they will negatively affect Asian sovereigns’ and manufacturers’ credit profiles given the region’s trade-reliant industries and economies,” the credit rating agency said in a note to clients.

On Monday, Trump approved new safeguard tariffs on imported large residential washing machines and solar panels. He approved tariffs of up to 50% on imported large residential washing machines for three years and up to 30% on imported solar panels for four years.

The move, at the recommendation of the US International Trade Commission, was intended to protect domestic producers from “serious injury” under World Trade Organization rules.

Yet given the likelihood, Moody’s said the tariffs announced so far will have a negligible credit impact on rated Asian manufacturers given that their direct exposure to the US remains small.

The immediate effect on China-US trade flows will also be minimal as the total number of Chinese exports of these two types of products to the US accounted for only about 0.1% of China’s total exports, the agency said, citing UN Comtrade.

“Chinese manufacturers of solar panels also moved most production to Malaysia (A3 stable), Thailand, Vietnam and Taiwan (Aa3 stable). According to the Energy Trade Action Coalition, 31% of US solar installations used imported cells and modules from Malaysia, 21% from Korea, 14% from Vietnam and 11% from China during January to November of 2017,” said Moody’s.

Long-term impact on investments will also be limited, it said, adding: “The tariffs expire in four years and recent future pricing of solar energy for 2023 reached record lows. The near-term impact is also partly mitigated by annual tariff declines and exceptions for the first 2.5 gigawatts of imports.”

Looking ahead, the agency noted that trade protectionism remains a risk for the Asian region in 2018, with global trading environment potentially becoming less supportive of Asian growth.

“Asia is exposed to unfavourable shifts in US trade policy, given the volume of direct exports to the US, but also intermediate trade activity through supply chains, most notably through greater China.

“More broadly, greater emphasis on bilateral rather than multilateral trading arrangements would be credit negative for Asian economies given the benefits to the region from an open, rules-based regime of international trade,” said Moody’s.