With US-China trade tensions showing no signs of abating, the three Asian (ex-Japan) countries whose exports are most vulnerable to a tit-for-tat trade war are Taiwan, Vietnam and South Korea. The chart, taken from a report by DBS Group Research, shows the percentage share of exports to US and China of the total exports of a country. A higher exposure is bound to impact the currency and equity markets.

The Korean won, for instance, depreciated the most (1.5%) last week as negotiations continue on US-Korea Free Trade Agreement. Meanwhile, the Vietnam dong depreciated to the weakest level in 2017. An additional twist to the scenario comes from the fact that Korean firms that have factories in Vietnam account for a “significant share" of the latter’s exports to the world.

Foreign exchange trading is likely to turn more volatile. The triggers would obviously come from fears over US President Donald Trump’s strategy that has already led to depreciation of six out of the 11 Asian (ex-Japan) currencies monitored by DBS. India and Indonesia are no exceptions. The Japanese yen, on the other hand, is being viewed as a safe haven. Further, according to the report, unlike in January when all Asian (ex-Japan) stock markets rose, five have already fallen year-to-date (23 March).

Many Chinese exporters that operate on wafer-thin margins would be hurt if tariffs are imposed on those products. This may change the product pricing in global markets that in turn could have an impact on profitability and investor perception towards equity markets.