The US and China won't be the only ones hurt by their tit-for-tat tariffs

Asian economies such as Taiwan, South Korea and Southeast Asia could be badly hit if trade tensions between the U.S. and China heat up further, experts have warned.

The U.S. fired the first shot on Friday with tariffs on $34 billion worth of Chinese goods from 818 product categories. In response, China implemented retaliatory tariffs on some imports from the U.S., said its foreign ministry, according to a Reuters report.

The tit-for-tat could go on with President Donald Trump saying he would consider imposing additional tariffs on $500 billion in Chinese goods if China retaliates.

Taiwan, South Korea and Southeast Asian countries such as Singapore and Malaysia are among the most export-dependent economies — which make them especially vulnerable when global trade is under threat.

"Given the trade open-ness and exposure to the supply chain, there will no respite whatsoever for Malaysia, Singapore, South Korea, and Taiwan in this tail risk scenario," said Taimur Baig, chief economist of Singapore's DBS Bank.

He estimated that 0.8 percent could be shaved off Singapore's growth in an event of "an all-out trade war," defined as 15 percent to 25 percent tariffs on all products traded between the world's two largest economies. The Southeast Asian city-state is expected to grow 3 percent this year.

Taiwan and Malaysia could see their expected growth rates this year — of 2.8 percent and 5 percent, respectively — lowered by 0.6 percent, Baig added. South Korea, meanwhile, could lose 0.4 percent from its estimated 2.9 percent growth in 2017, according to the economist.

The two countries at the front and center of the escalating trade frictions, China and the U.S., could see a 0.25 percent downside to their growth prospects this year, Baig estimated.

Largest exporters of 'intermediate goods' to China

Many Asian economies export "intermediate goods" to China, which then assembles those pieces into finished products to ship to final destinations such as the U.S., noted Gareth Leather, senior Asia economist at Capital Economics.

Trump steps up trade rhetoric    6:08 PM ET Thu, 5 July 2018 | 02:42

Examples of "intermediate goods" include semiconductor chips and screens. Those components are typically manufactured in different locations across Asia before they're sent to China for assembly into products such as mobile phones and computers.

The first round of tariffs expected on Friday do not target "goods commonly purchased by American consumers such as cellular telephones or televisions," according to the Office of the US Trade Representative. But if those tariffs — and subsequent rounds — result in a fall in Chinese exports to the U.S., there will be knock-on effects for the rest of Asia, J.P. Morgan analysts wrote in a note.

"By its very nature, such products are highly reliant on tightly integrated supply chains. To that extent, this would propagate any trade shock into the region," the J.P. Morgan analysts said.

Such threats are coming at a time when emerging markets, including those in Asia, have been battered by capital outflows and have seen their currencies weaken in the process.

By the end of Thursday, the Taiwanese dollar was down by around 2.9 percent since the start of the year to 30.524 per U.S. dollar, while the Korean won weakened 4.9 percent to 1,118.33 per U.S. dollar in the same period.

In Southeast Asia, Singapore's currency was down 2 percent year-to-date on Thursday to 1.3645 per U.S. dollar, while the Malaysian ringgit saw a smaller dip of 0.07 percent to 4.041 per U.S. dollar during the same time frame.

But until all the targeted goods are known, it's difficult to quantify the actual impact that Asian economies could actually see, experts said. In fact, the damage could also be smaller than expected since China is the dominant supplier of many goods that it sells to the U.S., Leather said.

"U.S. consumers would struggle to find sufficient substitutes to replace the goods that they currently buy from China, at least in the short-term. What's more, to the degree that other countries can step in, Asian exporters are well-placed to benefit from any shift in U.S. demand," he said.

"Until we know exactly which goods are targeted, it will be impossible to calculate the impact on the rest of Asia," he added.