Asian Economies Rocked by Trump's Tariffs, Fears of Trade War

China and countries all across Asia have been hit hard by US President Donald Trump’s reciprocal tariffs, which were unveiled at the White House on Wednesday.

Tariffs ranging from 10% and up to nearly five times higher were announced on goods exported to the United States, on top of levies imposed on both rival states and staunch allies. Trump’s risky and highly contentious strategy is now reverberating around the world.

The move has intensified fears of a global trade war – with both China and the European Union already vowing to push back – because of the threat to economic growth amid predictions of a wave of inflationary price rises.

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Reuters said the sweeping penalties announced against the serene backdrop of the White House Rose Garden on Wednesday unleashed turbulence across world markets and drew condemnation from other leaders now facing the end of decades of trade liberalization that have shaped the global order.

And as Asia digested the news on Thursday, Japan’s Nikkei share index slumped to an eight-month low (down 2.8%), while all major stock markets in Asia were down. US and European stock futures were also diving, as investors scrambled to the safety of bonds and gold.

China, the world’s No-2 economy, faced with a fresh 34% tariff on top of the 20% Trump previously imposed, vowed countermeasures, seemingly taking little heed of a warning by US Treasury Chief Scott Bessent that such moves would lead to escalation.

Allies among those shocked, upset

Close allies like Japan and the European Union were not spared, facing 24% and 20% tariff rates respectively.

India (26%), South Korea (25%) and Taiwan (32%) were also among those rocked by the high levies imposed, despite earnest moves in recent weeks to negate such impacts and Trump’s remark that ‘reciprocal tariffs’ – which followed 25% tariffs on the steel and auto sectors – would be “lenient.”

Analysts in Australia, which now faces a 10% tariffs on its exports to America, despite a small trade imbalance, said its free-trade agreement with the United States appears to have been broken or disregarded.

But the inclusion of a 29% tariff on Norfolk Island – with a population of just 2,000 – and the inclusion of two other islands further south, was met with puzzlement, disbelief and bemusement Down Under, given they have long been external territories of Australia.

Heard and McDonald Islands are barren outcrops near Antarctica known mainly for their two active volcanoes, but populated only by penguins.

The White House said the base 10% tariffs go into effect on Saturday (April 5) and the higher reciprocal rates next Wednesday (April 9).

EU chief Ursula von der Leyen described the tariffs as a major blow to the world economy and said the 27-member bloc was prepared to respond with countermeasures if talks with Washington failed.

“The consequences will be dire for millions of people around the globe,” she said in a statement.

The ‘reciprocal tariffs’, Trump said, were a response to duties and other non-tariff barriers put on US goods. He argued that the new levies will boost manufacturing jobs at home.

“For decades, our country has been looted, pillaged, raped and plundered by nations near and far, both friend and foe alike,” Trump said.

Many economists and analysts have warned that tariffs could slow the global economy, raise the risk of recession, and increase living costs for the average American family by thousands of dollars.

Canada and Mexico, the two largest US trading partners, already face 25% tariffs on many goods and did not face additional levies from Wednesday’s announcement.

Neither did Russia, with the White House saying their current level of bilateral trade is “zero.”

Top adviser eyeing long-term gains

Even some fellow Republicans have expressed concern about Trump’s aggressive trade policy.

Within hours of Wednesday’s announcement, the Senate voted 51-48 to approve legislation that would terminate Trump’s Canadian tariffs, with a handful of Republicans breaking with the president. Passage in the Republican-controlled US House of Representatives, however, was seen as unlikely, Reuters said.

Trump’s top economist, Stephen Miran, told Fox Business on Wednesday the tariffs would work out well for the US in the long run, even if they cause some initial disruption.

“Are there going to be short-term bumps as a result? Absolutely,” Miran, the chairman of Trump’s Council of Economic Advisors, told the network’s “Kudlow” program.

The reciprocal tariffs do not apply to certain goods, including copper, pharmaceuticals, semiconductors, lumber, gold, energy and “certain minerals that are not available in the United States,” according to a White House fact sheet.

‘Loophole’ shut, but more levies loom

Following his remarks, Trump also signed an order to close a trade loophole used to ship low-value packages – those valued at $800 or less – duty-free from China, known as “de minimis.”

The order covers goods from China and Hong Kong and will take effect on May 2, according to the White House, which said the move was intended to curb the flow of fentanyl into the US.

Chinese chemical makers are the top suppliers of raw materials purchased by Mexico’s cartels to produce the deadly drug, US anti-narcotics officials say.

An investigation by Reuters last year showed how traffickers often route these chemicals through the United States by exploiting the de minimis rule. But China has repeatedly denied culpability.

Trump is also planning other tariffs targeting semiconductors, pharmaceuticals, and potentially critical minerals, the official said.

Earlier in the day, the administration said a separate set of tariffs on auto imports that Trump announced last week will take effect starting on Thursday.

Trump previously imposed 25% duties on steel and aluminum and extended them to nearly $150 billion worth of downstream products.

Tariff concerns have already slowed manufacturing activity across the globe, while also spurring sales of autos and other imported products as consumers rush to make purchases before prices rise.

US Representative Gregory Meeks, the top Democrat on the House Foreign Affairs Committee, said he would introduce legislation to end the tariffs. But Reuters says such a bill has little chance of passing the Republican-controlled Congress.

“Trump just hit Americans with the largest regressive tax hike in modern history – massive tariffs on all imports. His reckless policies are not only crashing markets, they will disproportionately hurt working families,” Meeks said.