Asian equity markets declined sharply as former U.S. President Donald Trump's renewed threats of sweeping tariffs on imports from China and other Asian nations sparked renewed fears of global trade disruption. The benchmark MSCI Asia Pacific Index dropped 2.3%, with tech-heavy markets leading the losses.
- Trump’s proposed 60% tariff on Chinese imports and 35% on Vietnamese and Thai goods reignited trade fears
- MSCI Asia Pacific Index dropped 2.3%, its largest one-day fall in three months
- TSMC shares fell 4.1%, Alibaba dropped 5.7% on export and supply chain concerns
- Yuan weakened to 7.28, while South Korea and Taiwan bond yields rose 12–15 basis points
- World Bank warns of 1.2% GDP contraction in Asia if tariffs are enacted
- Central banks in Japan and China signal cautious policy adjustments amid uncertainty
Global investors reacted with caution as former U.S. President Donald Trump announced plans to impose 60% tariffs on all imports from China and 35% on goods from Vietnam and Thailand if re-elected in 2028. The remarks, delivered in a rally in Florida on January 16, sent shockwaves through financial markets, particularly in Asia. The MSCI Asia Pacific Index fell 2.3% by close, marking its largest single-day decline in three months, with Japan’s Nikkei 225 dropping 2.8% and South Korea’s KOSPI losing 2.6%. The volatility extended to regional currencies and bond yields. The Chinese yuan weakened to 7.28 per U.S. dollar, its weakest level since August 2023, while South Korean and Taiwanese government bond yields rose by 12 and 15 basis points, respectively, reflecting heightened risk aversion. Technology stocks were especially hard-hit: Taiwan Semiconductor Manufacturing Company (TSMC) shares fell 4.1%, and China’s Alibaba Group dropped 5.7% amid concerns over supply chain disruptions and reduced export competitiveness. The market reaction underscored how trade policy uncertainty continues to influence investor sentiment, even ahead of the 2028 U.S. presidential election. Asian economies reliant on exports—particularly in electronics, automotive, and textiles—face elevated exposure to potential protectionist measures. Analysts warn that a return to aggressive tariff policies could erode global trade flows and reduce corporate profitability across the region, with the World Bank projecting a 1.2% contraction in regional GDP growth if such measures are implemented. Investors are now focusing on central bank responses, with the Bank of Japan signaling it may delay rate hikes despite inflationary pressures, while the People’s Bank of China reiterated its commitment to stabilizing capital flows. Market participants are closely monitoring U.S. political developments and trade negotiations, as confidence in sustained economic openness remains fragile.