Asian markets slide after Trump threatens 100% tariffs on China

Asian markets slid on October 13, following President Trump’s threats to raise tariffs on all Chinese imports and cancel a planned meeting with China’s President Xi Jinping, foreign media reports indicate.

Hong Kong’s Hang Seng index fell more than 2.5 per cent, while benchmark indexes in South Korea and Shanghai dropped around 1 per cent. Taiwan’s Taiex closed down roughly 1.4 per cent. Japan’s markets were closed for a holiday, but Nikkei futures had fallen about 5 per cent on October 10 before recovering some losses.

The downturn in Asia mirrored declines in U.S. stocks on Friday after Trump posted on social media that he was considering a “massive increase in tariffs” on Chinese goods, erasing the S&P 500’s gains from the previous week.

Following market close, Trump specified that the U.S. would impose a 100 per cent tariff on Chinese products starting November 1 and implement export controls on “any and all critical software.”

Trump’s moves came in response to China’s announcement that it would restrict exports of certain rare-earth minerals used in high-tech products such as semiconductors, electric vehicles, and fighter jets.

Over the weekend, Trump adopted a softer tone on social media, stating that the U.S. did not want to “hurt” China and adding, “it will all be fine!” U.S. stock futures recovered, with the S&P 500 bouncing back about 1.3 per cent.

Asian markets had largely rebounded since April, when U.S.-China trade tensions led to plans for tariffs exceeding 100 per cent, causing global market declines. A temporary reduction of tariffs in May gave investors hope that the trade dispute was easing.

However, China’s export restrictions and Trump’s tariff threats illustrate how quickly tensions can flare between the world’s two largest economies.

“The latest developments raise the possibility that the two countries could once again enter into a trade war,” said Takahide Kiuchi, executive economist at Tokyo-based Nomura Research Institute. “If that happens, the consequences for the global economy would be significant,” he added.

Investors are now assessing whether these threats are genuine or strategic moves ahead of bilateral talks scheduled for later this month, Goldman Sachs noted in a report. “We lean toward the latter and expect the resolution will likely be an extension of the current tariff pause,” the bank said.

Chinese export data released Monday indicated that trade tensions had not significantly slowed shipments abroad. Overall exports in September rose 8.3 per cent year-on-year. While exports to the U.S. fell 27 per cent, China compensated with strong growth in the European Union, Southeast Asia, and Africa.

Exports to Europe increased 14 per cent, the highest in three years, and shipments to Southeast Asia climbed 16 per cent, driven by trade with Vietnam and Thailand. The largest gains came from Africa, where shipments surged 56 per cent, fueled by rising demand for Chinese batteries, solar panels, electric vehicles, and industrial equipment.

By Tamilla Hasanova