Asia, in general, is “quite immune” to any major pain from the ongoing tariff battles, she told CNBC on Wednesday.
Daiwa noted that trade risks could have some negative impact, especially if global supply chains, in which Asia plays a key role, take a significant hit.
“This could in turn dampen individual income growth and dent consumer confidence, leading to reduced private spending,” it said.
Consumer spending in Asia has also been boosted in recent years by a world awash in liquidity in the decade following the global financial crisis. Central banks, led by the U.S. Federal Reserve, turned on the taps after credit seized up following the collapse of investment bank Lehman Brothers 10 years ago this month.
Daiwa said that despite some “marginal tightening” in Asia in the wake of Fed rate rises in recent years, the overall monetary policy environment remains loose.
“However, if global liquidity conditions tighten by more than expected, Asian economies are likely to see capital outflows, slow economic growth, and rising inflation,” the report said, noting that households could possibly cut spending.
That would be a particular problem for South Korea, Taiwan, Hong Kong and Thailand where households have resorted to heavy borrowing as higher interest rates would force them to tighten their belts, the report added.
But Daiwa and others stressed that authorities in Asia are ready to step in with stimulus to avoid any major downturns.
“The recent weakness in Chinese onshore domestic consumption might provide the opening for the government to initiate supportive policy action, in our view,” UBS said in a report dated Tuesday, referring to authorities in Beijing.
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