After President Trump decided to pause punishing tariffs on several countries, markets in Asia saw a positive reaction. Stock markets in Taiwan, Japan, and South Korea rose significantly following the announcement of a 90-day reprieve from the reciprocal tariffs. While these countries won’t face the previously threatened 24 to 32 percent tariffs, they will still be subject to a lower rate of 10 percent, in addition to the 25 percent tariffs on goods like cars. In the United States, this reversal sparked the biggest rally for the S&P 500 since October 2008, in anticipation of central bank rate cuts.
Even with the pause on punishing tariffs, Mr. Trump did not retract the new tariffs exceeding 100 percent that he imposed on China. The ongoing trade war between the U.S. and China has led to multiple rounds of tariffs, significantly impacting the cost of trade between the two countries. China recently increased its tariffs on American imports to 84 percent, prompting concerns about escalating tensions. However, President Trump expressed confidence that further tariff increases would not be necessary and expressed optimism about reaching a deal with China.
In Hong Kong, stock markets rose by around 2.5 percent, while Shanghai saw a modest gain of about 1 percent. Analysts like Takahide Kiuchi from Nomura Research Institute believe that Trump’s focus has shifted towards preparing for a trade war with China, rather than solely reducing trade deficits. This shift in focus poses continued risks for countries like Japan and South Korea, which have China and the U.S. as their top trade partners. Despite efforts by the Chinese government to stabilize markets, the uncertainty surrounding global trade continues to impact stock markets.
Over the past week, President Trump’s trade policies have caused market volatility, leading to significant fluctuations in stock prices. While the rally on Wednesday provided temporary relief, the S&P 500 remains below its February peak, marking the worst start to a presidential term since 2001. In Asia, stock benchmarks have also experienced declines, with Japan and Taiwan dropping around 12 percent, while South Korea’s Kospi index has remained relatively flat. The ongoing trade tensions continue to pose challenges for global markets, requiring careful monitoring and strategic responses.
In conclusion, the temporary pause on punishing tariffs for selected countries provided a brief respite for Asian markets, leading to a rally in stock prices. However, the ongoing trade war between the U.S. and China continues to pose risks and uncertainty for global trade. The shifting focus of President Trump’s trade policies towards China indicates a potential escalation in tensions, requiring countries like Japan and South Korea to remain vigilant. As markets continue to react to trade developments, it is essential for policymakers and investors to closely monitor the situation and adapt to the evolving trade landscape.
