Asian markets were sent reeling into a tailspin on Monday. This came in the wake of President Donald Trump’s own announcement that foreign governments should pay “a tremendous amount of money” to have the tariffs he likes to call “medicine” removed. Including this announcement as part of quantitative easing has sent shockwaves through global stock markets, with Asian equities seeing some of the biggest drops.
Trump’s tariffs continue to spook Asian share markets. In light of the growing trade war, stock markets in Hong Kong and China have crashed as investors panic. Global markets are rattled after China revealed its plan to retaliate with an extra 34% levy on US products. This step by China is being framed as retaliation against the current tariffs. The drama further highlights the continuing escalation of the global trade war and its corrosive effect on market certainty.
The U.S. market took a big hit. The slump has been historic. The benchmark S&P 500 just suffered its biggest weekly plunge since March 2020. This fall follows last week’s 9% drop. That represents the largest one-week percentage decline for the index since March of 2020, a span of more than three years. The aftermath has caused one of the most dramatic shifts in U.S. Treasury yields on record. The two-year yield has tumbled more than 20 bps to 4.77%, its lowest since last September.
Market futures now suggest that investors anticipate nearly 120 basis points’ worth of cuts by the Federal Reserve by December. According to recent analyses, markets imply a roughly 60% chance that the U.S. central bank could ease rates as early as May. These changes are noted because they indicate the increasing anxiety of investors about the potential economic impact of this current trade war.
Republican presidential candidate Donald Trump defended his tariff policy. He said, “I don’t want to see anything cut, but sometimes you need to take some medicine to cure something.” He assured the markets that he was not, repeat not, deliberately designing a market sell-off. His administration doubled down on its comprehensive tariff plans. This obstinate position injected additional volatility into the capital markets.
Chinese officials soon responded to our own measures by announcing that “the markets had spoken,” with their retaliatory measures against American goods. Tensions continue to escalate between the two economic superpowers. If both parties are willing to endure a little pain in the short term for the possibility of long-term gain.
The sell-off has hit hard the sectors most affected by trade policy. The index of Japanese banks has been walloped. It has fallen sharply by as much as 30% in the last three trading days. Investors are rightfully on edge with the current financial stability with the continuing trade wars and current tariffs rising.
Asian markets are already beginning to suffer from Trump’s controversial tariff policies. Analysts are monitoring for signs of a shift in strategy from the U.S. and China. Retaliation strikes back The maturing situation will very probably keep shaking up market forces and investor psychology over the next weeks.