Asian stock markets saw significant downturns in Monday's trading sessions as uncertainty loomed over U.S. President Donald Trump's impending tariffs on key trading partners. This development has stirred investor anxiety regarding potential global trade disruptions. The Japanese Nikkei 225 index fell sharply by 2.7%, closing at 38,520.09. Meanwhile, Australia's S&P/ASX 200 and South Korea's Kospi experienced declines of 1.8% and 2.5%, respectively. The Hang Seng Index in Hong Kong also slipped by 0.3%. The Shanghai market remained closed due to a national holiday.
Market analysts have expressed concerns that the tariffs could trigger increased volatility and a shift in global trade dynamics. According to Yeap Jun Rong, a market strategist at IG, “The implications of trade restrictions could significantly alter global trade flows, potentially leading to supply chain adjustments, increased costs for businesses, and higher inflation rates.”
These concerns are reflected on Wall Street as well, where all major indices suffered losses last week. The S&P 500 decreased by 0.5%, while the Nasdaq Composite and Dow Jones Industrial Average fell by 0.3% and 0.8%, respectively. This marks the first weekly decline for these indices in three weeks, with the technology and energy sectors being particularly affected.
Investor sentiment took a further hit following reports from a Chinese tech company, DeepSeek, which announced the development of a cost-effective large language model capable of competing on a global scale. This announcement cast doubt on the necessity of the projected investments in AI chips, leading to a decrease in technology-related shares.
The anxiety around these tariff implementations is further exacerbated by the fact that Trump's 25% tariffs on imports from Canada and Mexico, as well as the 10% on Chinese goods, were slated to commence on Tuesday. The administration has not specified what advancements would be necessary in halting illegal immigration and fentanyl smuggling to eliminate these tariffs.
In retaliation, Canada and Mexico have planned tariffs on American products, although specifics from Canada were initially undisclosed. Long-term bond yields saw an uptick, with the 10-year Treasury yield climbing to 4.54% from 4.52%. This rise is part of a trend since September, as the U.S. economy has shown more resilience than anticipated by many economists.
The U.S. Federal Reserve maintained its benchmark interest rate last week and adopted a cautious stance regarding the potential impacts of U.S. trade policies on inflation and economic growth.
In energy commodities, there was a notable rise with U.S. crude oil prices increasing by $1.37 to settle at $73.90 per barrel, while Brent crude rose by 72 cents, reaching $76.39 per barrel. On the currency front, the U.S. dollar appreciated slightly against the Japanese yen, while the euro depreciated.
This ongoing tariff situation underscores the intricacy and fragility of international economic relations, prompting investors and businesses to navigate cautiously in response to policy changes.
