Asian Markets Decline After Trump's Tariff Announcements

BANGKOK -- Asian stock markets and U.S. futures experienced a significant decline on Thursday, following U.S. President Donald Trump's announcement of substantial tariff increases on imports from various countries. The Nikkei 225 index in Tokyo initially fell over 4% before slightly recovering, ultimately closing down by 2.9% at 34,675.97. Trump indicated a 24% 'reciprocal tariff' on Japan, a key U.S. ally, while South Korea faced a 25% tariff, causing its benchmark Kospi to drop 1.5% to 2,468.97.

In Hong Kong, the Hang Seng Index decreased by 1.4% to 22,887.03, and the Shanghai Composite index saw a minor decline of less than 0.1%, finishing at 3,348.67. Yeap Junrong of IG noted that the announcement was a 'major shock,' particularly for China, which is now subjected to an additional 34% tariff, raising its total tariff burden to 64% when factoring in previous measures.

Despite these losses, there are expectations that Beijing may introduce further economic stimulus to mitigate the impact of these heightened tariffs. In Australia, the S&P/ASX 200 fell by 1.3% to 7,830.30. Futures for the S&P 500 dropped by 3%, while those for the Dow Jones Industrial Average decreased by 2%, suggesting potential declines when U.S. markets open on Thursday.

On the previous day, U.S. stocks experienced volatility before Trump unveiled the 'Liberation Day' tariffs. The S&P 500 managed a 0.7% gain, closing at 5,670.97 after fluctuating between a 1.1% loss and a subsequent gain. The Dow Jones Industrial Average rose by 0.6% to 42,225.32, and the Nasdaq composite increased by 0.9% to 17,601.05. Tesla's stock contributed to this volatility, initially dropping over 6% due to a report indicating fewer electric vehicle deliveries in the first quarter compared to the previous year, before eventually closing 5.3% higher.

Financial markets globally have been on edge due to the uncertainties surrounding Trump's trade policies, which are aimed at creating a more equitable global trade system and bringing manufacturing jobs back to the U.S. However, these tariffs risk stifling growth in the U.S. and other economies while potentially exacerbating inflation, which is currently above the Federal Reserve's 2% target.

Following the market's close, Trump announced a 10% baseline tax on imports from all nations, along with increased tariffs on various countries that maintain trade surpluses with the U.S. A chart presented during his address indicated that imports from China would be taxed at 34%, those from the European Union at 20%, and imports from Taiwan at 32%.

Trump had previously imposed 25% tariffs on auto imports and additional levies against China, Canada, and Mexico, along with expanded tariffs on steel and aluminum. New tariffs against countries importing oil from Venezuela and plans for separate import taxes on pharmaceuticals, lumber, copper, and computer chips are also on the table.

In the bond market, Treasury yields fluctuated, mirroring the indecisiveness in the stock market. The yield on the 10-year Treasury note dropped to as low as 4.11% before rising back to 4.18%. Higher yields can signify increased expectations for economic growth or inflation. In commodity markets, U.S. benchmark crude oil prices fell by $2.08 to $69.63 per barrel, while Brent crude dropped by $2.06 to $72.89 per barrel. The dollar weakened against the yen, falling to 148.07 from 149.28, whereas the euro appreciated to $1.0897 from $1.0855.