Equities across Asia nosedived on Monday after US President Donald Trump shocked global investors by saying his planned reciprocal tariffs would target every single country.
An announcement on reciprocal tariffs is expected this week on April 2, and it was previously assumed they would be imposed on just 10 to 15 countries which have the biggest trade imbalances with the US.
But Trump’s declaration on Sunday that he’d “start with all countries” has fanned fears of a global trade war and a recession as a result.
Also on AF: China, Japan, South Korea Boost Trade Ties, as US Tariffs Loom
On Monday, those worries weighed heavily on Asian markets.
The region’s biggest loser was the Nikkei share average in Japan, which tanked 4.05% at the loss of more than 1,500 points, closing near an eight-month low.
This was the Nikkei’s biggest daily decline since September 30. The broader Topix fell 3.5%.
Equities in Japan have already been reeling since last week when Trump announced a 25% tariff on imported cars and auto parts on Wednesday. Transport stocks in Tokyo lost $16.5 billion in market value in just a day following the tariff announcement.
The carnage in automotive stocks continued on Monday with Toyota and Honda tanking more than 3% each and Nissan falling more than 4%. Automakers in Japan have the second highest exposure to US auto tariffs after Mexico.
The Nikkei 225 has lost more than $288 billion in market capitalisation since Thursday, as of its closing today.
Investor uncertainty on Japanese markets has also been exacerbated by the fact that the country is home to an extensive chip tools industry, making it additionally vulnerable to additional chip-related tariffs promised by Trump. The planned reciprocal tariffs will be on top of any other levies including those previously imposed on aluminum, steel and autos.
Monday’s volatility saw Japanese chipmaker Renesas Electronics tanking an eye-watering 11.21%. Meanwhile, chip-related stocks Tokyo Electron and Advantest fell 6.57% and 7.65%, respectively.
South Korea in trouble too
Aside from Japan, investors also pulled out from equities in South Korea, whose automakers and chipmakers are similarly exposed to Trump’s auto tariffs and planned chip tariffs.
Moody’s Analytics economists say auto tariffs could “shave 0.2 to 0.5 percentage points from growth” in Japan and South Korea each.
South Korea is also likely to be one of the countries facing the most stringent reciprocal tariffs, considering Trump accused Seoul in January of imposing average tariffs four times higher than the level in the US.
The South Korean government has rebuffed that claim, saying its trade treaties with the US mean American goods face levies of less than 1% in the country.
Nevertheless, Trump’s threats on Sunday spurred the Korean benchmark Kospi index to drop 3% on Monday, hitting its lowest level since early February.
The Kospi fall was amplified by a resumption of short-selling after 17 months. This was the first time the country’s short-selling ban was fully lifted in five years.
Among the biggest losers on the local share market were chipmakers SK Hynix and Samsung Electronics, which fell 4.3% and 3.99% respectively.
Meanwhile, battery-maker LG Energy plunged more than 6%. Carmakers Hyundai and Kia also fell more than 3% each.
Jittery Taiwan
Shares plunged over in Taiwan as well, with the island believed to be one of the 15 countries that have the highest trade surpluses with the United States.
The Taiwan Weighted index slumped 4.38% on Monday. Taipei-listed shares of chipmakers MediaTek and TSMC slumped 5.12% and 4.41%, respectively. Electronics giant Foxconn — which trades as Hon Hai Precision Industry — tanked 5.19%.
Aside from reciprocal tariffs, Taiwan is also vulnerable to Trump’s potential semiconductor levies. The island is home to scores of chipmakers, which supply semiconductors for almost all industries across the world.
Analysts from ING and Morgan Stanley say that an announcement by TSMC, the world’s largest contract chipmaker, to invest $100 billion in the US could soften Trump’s stance on Taiwan.
But uncertainty remains after Trump reiterated last week that he would impose import tariffs on semiconductors “down the road”.
On Sunday night, Taiwan President Lai Ching-te met senior officials to discuss the possible impact of US tariffs and receive an update on contingency plans, Reuters reported.
Safe havens in demand
Elsewhere in Asia, markets in Hong Kong and the Chinese mainland slipped 1.33% and 0.47%, respectively. Shares in Manila were also down 1.50%. Markets in India, Indonesia, Malaysia, and Singapore were on holiday.
MSCI’s broadest index of Asia-Pacific shares outside Japan tanked 2.03%.
Foreigners have pulled more than $4 billion from Southeast Asian stocks in the March quarter, marking the largest combined outflow since 2020.
“Markets will now be fully at the mercy of an impending deluge of tariff-related headlines,” Pepperstone’s Chris Weston was quoted as saying by AFP.
Markets also fell sharply in Europe, with analysts citing tariffs uncertainty as the key reason behind the upheaval in equities.
“For the first time in years, we find ourselves genuinely worried about risk assets,” said Ajay Rajadhyaksha, head of rates markets at Barclays.
“If policy chaos and trade wars worsen much further, a recession is now a realistic risk across major economies,” he added.
In line with those concerns, Goldman Sachs raised the probability of a US recession to 35%, and also forecasted a decline in the world’s largest economy’s GDP growth.
Meanwhile, a jump in safe haven trades sent gold to another record-high. Investors also piled into sovereign bonds and the Japanese yen.
Why is Trump imposing tariffs?
Trump sees tariffs as a way of protecting the domestic economy from unfair global competition and a bargaining chip for better terms for the US.
He has promised to unveil a massive tariff plan on Wednesday, which he has dubbed “Liberation Day.” He has already imposed tariffs on aluminium, steel and autos, along with increased levies on all goods from China.
He says he now intends to impose a suite of ‘reciprocal tariffs’ against nations that charge fees on US exports, promising to match those countries’ duties.
Trump administration officials, including Treasury Secretary Scott Bessent, have previously said that much of the reciprocal US tariff focus will be on 15 countries that have the highest trade surpluses with the United States, while Trump has claimed they would be ‘lenient’.
Bessent has referred to the countries as the “Dirty 15” but has not named them. According to US Census Bureau data, they include China, South Korea, Taiwan and the European Union.
- Vishakha Saxena
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