In summary, 2017 looks like it will be the most difficult for the region since 2009. It’s not, of course, entirely the president-elect’s fault – his administration, after all, hasn’t even outlined a detailed policy agenda yet, let alone taken the reins of power.
Plus, Asia’s travails are partly self-inflicted. Still, if the past few weeks are any indication, things are bound to get a lot tougher. Trade is one thing, with exports already struggling and little prospect for a policy-driven rebound. The bigger issue, though, is the dollar and rates. Financial conditions are tightening across the region, putting a squeeze on domestic demand. It will get bumpier still.
Start with exports. These, as noted, have struggled for some time now. A combination of factors is to blame, including weak capex the world over, the commodity investment slump, creeping protectionism (or at least the absence of major trade liberalisation over the past decade), supply chain disintegration, and an expenditure shift towards services.
The question for 2017 is whether exports will at last rebound. We have our doubts. An acceleration in US growth should help. Yet this may be offset by continued sluggish demand elsewhere in the world, not least in emerging markets.
The Trump administration may also help spur a recovery in US private capex, via deregulation and purportedly more business friendly policies. Yet it will take time before the full impact is felt, leaving this to be, presumably, more of a story for 2018 and beyond.
The key to watch will be a deal with Congress to repatriate offshore cash holdings by US companies, but it’s not clear that this in itself will send capex soaring if record-low rates previously failed to do so.
At the same time, a Trump administration may adopt a more protectionist stance. True, details aren’t available yet, apart from some vague talk about punitive action and the promise to shelve the Trans Pacific Partnership. This, no doubt, will restrain exports, even if the impact will likely be more industry specific. But note that uncertainty over the US’s trade policy in itself will promptly weigh on growth in Asia by curtailing investment.
It’s hard to see, therefore, a meaningful revival in Asia trade for the foreseeable future. However, the bigger issues, at least in the near-term, are US rates and the dollar. In fact, HSBC’s chief US economist Kevin Logan now expects three Fed hikes over the coming year (up from two).
This amounts to a stiff headwind for Asian economies that have come to rely on rapid credit growth to sustain demand in recent years. Even China, still partly protected by capital controls, is not immune to this. Elsewhere, rate cuts are also becoming a more remote prospect, such as in Malaysia where policy room is shrinking even as growth sags.
Currency moves are compounding the effect. While exchange rate depreciation should, in principle, provide a boost to Asian exporters, the resulting tightening in financial conditions (higher rates) could more than offset the loosening of monetary conditions (weaker exchange rates). Challenging stuff. But the effects are not necessarily uniform across Asia. Indonesia, the Philippines, and India are likely to be more shielded from the “Trump effect” given their low debt and low export exposures. By contrast, Malaysia, China, South Korea, Taiwan, and Thailand should be more affected.
The winner, if one can call it that, is the Bank of Japan, with the weaker yen taking the pressure off. But that’s not much of a consolation: Japan, too, will in the end need exports to do a lot better to cure its growth malaise.

Frederic Neumann, the author, is co-head of Asia Economics Research, HSBC