Asian Markets Brace for Sharp Decline as US Tariffs Escalate Trade Tensions

Asian shares are on track for their worst weekly drop since April following the US government’s decision to impose steep tariffs on imports from key trading partners. President Trump signed an executive order raising tariffs to rates between 10% and 41%, targeting countries including India, Taiwan, South Korea, Canada, and others. This move has amplified trade uncertainties and pressured markets already cautious ahead of critical US jobs data.

The tariffs have led to broad declines across major Asian markets, with South Korea’s KOSPI plunging 3.5% and other indexes like Taiwan’s, Japan’s Nikkei, and China’s blue chips also falling sharply. Investors are concerned about the impact of higher trade barriers on economic growth in the region, as highlighted by analysts who warn that this escalation will weigh on global trade and investment sentiment.

In the US, equities also softened as tech giant Amazon missed earnings expectations, and inflation data signaled rising price pressures partly due to the new tariffs. This has dampened hopes for a Federal Reserve interest rate cut in September. Fed futures now price only a 39% chance of a rate cut, down from 65% earlier, as markets await the latest US jobs report, which will heavily influence monetary policy expectations.

Currency markets reflected these shifts, with the US dollar gaining against most peers, including a notable rise against the Japanese yen. Treasury yields remained mostly steady, while commodity prices such as oil and gold saw minimal change amid the heightened market volatility. Overall, the combination of trade tensions and mixed economic signals has heightened investor caution globally.

Source: Reuters