• Asia's factory activity contracted in May due to weak demand from China and US tariffs.
• Japan's Manufacturing Purchasing Managers' Index (PMI) was at 49.4, indicating ongoing contraction.
• South Korea's PMI stood at 47.7, also below the threshold for four consecutive months.
• The US has heightened tariffs on steel and aluminium, further impacting Asian economies.
• Trade talks between the US and Japan are scheduled amid growing economic uncertainties.

Asia's factory activity shrank in May, primarily driven by soft demand from China and the impact of US tariffs, highlighting the darkening economic outlook for the region. Reports from private surveys indicate that manufacturing in trade-reliant Japan and South Korea continued to see contraction during this period, as US President Donald Trump's automobile tariffs clouded export prospects. China's manufacturing activity has also shrunk for a second consecutive month, signaling persistent weakness in the world's second-largest economy, according to Reuters and Channel News Asia.

Analyzing the situation, analysts have expressed concerns over the slow progress in trade negotiations with the US, which continues to restrain corporate investment and production increases. Toru Nishihama, chief emerging market economist at Dai-ichi Life Research Institute, noted, "It's hard to expect a pick-up in Asia's manufacturing activity any time soon with countries in the region slapped with quite high 'reciprocal' tariffs." He emphasized that China's export of cheap goods is also exerting deflationary pressure across Asian economies, as reported by India Times and Reuters.

The latest data reported that Japan's Manufacturing Purchasing Managers' Index (PMI) stood at 49.4 in May, indicating that it remained below the crucial 50-point mark for the eleventh consecutive month, while South Korea's PMI was recorded at 47.7, below the threshold for four months running. Both countries experienced contractions in their economies during the first quarter of the year, largely due to the factors stemming from US tariffs and ongoing uncertainty over US trade policy, according to Channel News Asia and India Times.

On the geopolitical front, President Trump claimed that China had violated bilateral agreements related to tariff reductions, a statement that China vigorously contested, deeming it "baseless." Additionally, Trump announced plans to double tariffs on steel and aluminium from 25% to 50%, aiming to bolster protection for the US steel industry. Meanwhile, Japan and the US have agreed to hold further trade talks ahead of the upcoming G7 summit, although Japan's top tariff negotiator has indicated that no agreements will occur without comprehensive concessions from the US concerning all tariffs, including those on automobiles. Vietnam, Indonesia, and Taiwan also reported contractions in factory activity for May, as discussed by Reuters, Channel News Asia, and India Times.