The U.S. poured gasoline on the global market rout this week, sending shockwaves through stock markets throughout Asia. It was comments by President Donald Trump that sent the Asian trading session into chaos. This change further escalated the serious trade war that had been developing between the U.S. and other countries. His comments were particularly aimed at “reciprocal tariffs,” which is shorthand for the thorny issue of international trade relationships.
The trade war is escalating further due to U.S. policies. Consequently, the U.S. is incurring tariffs from countries that the U.S. has a trade surplus with, much to the detriment of the U.S. itself. Countries that beforehand did not pay trade tariffs now incur a 10% baseline tariff. This unexpected change in policy has of course raised stress levels and uncertainty across the global markets.
Market analysts noted that the chaos in trading bears similarities to the initial market slide at the outset of the COVID-19 pandemic. That crisis also reverberated across the globe, shaking economies everywhere to their foundations. Yet this most recent wave of tariffs has taken a heavy toll.
David Chao, a global market strategist for Asia Pacific at Invesco in Singapore, commented on the implications of President Trump’s statements.
“The comments further raise the uncertainty of potential negotiations or reprieves, especially given that even countries with which the U.S. has a surplus with were hit with a 10% baseline tariff.” – David Chao, Invesco
As stocks tanked, markets in Hong Kong suffered their worst decline since 1997. The negative sentiment rippled through other Asian markets as well, with investors reacting quickly to the news and distancing their portfolios from the uncertainty surrounding it.
The deepening of the global market rout by Trump’s comments highlights how tenuous the current state of international trade relations remains. Now, investors are holding back until the picture becomes clearer. They are doubly worried now, as the U.S. plays hardball on tariffs and FTA renegotiations.