In March, most of Asia's manufacturing sector saw a decline due to the escalating U.S. tariff war and sluggish global demand, which dampened business confidence. Private surveys showed a pessimistic outlook for the regional economy.

China stood out as the only exception, with its manufacturing activity showing improvement amidst the overall negative trend. Chinese factories expedited production to deliver goods to customers before U.S. tariffs came into effect.

The increasing threat of a global trade war is a growing concern for policymakers grappling with the task of minimizing the economic impact while managing inflationary pressures arising from rising expenses.

Countries like Japan, South Korea, and Taiwan experienced a drop in manufacturing activity in March as they braced for heightened uncertainty related to U.S. trade policies.

U.S. President Donald Trump implemented several tariffs on trading partners, and additional tariffs, particularly on auto imports, are on the horizon.

China's Caixin/S&P Global manufacturing PMI rose to 51.2 in March, surpassing market expectations. However, analysts anticipate the positive momentum to be short-lived given the looming trade war risks.

Despite the improvement in China's industrial sector, it is expected that U.S. tariffs will soon start to negatively impact its growth trajectory. Japan experienced the sharpest decline in factory activity in a year, while South Korea and Taiwan also faced slowdowns in manufacturing.

Moreover, economic indicators across the region indicate overall weakness, with South Korea's exports growing below expectations and Japan's tankan survey showing a significant drop in big manufacturers' business confidence to a one-year low.