Financial markets were hit hard by another wave of selling at the start of trading in Asia early today, with investors and economists grappling with rising odds of a severe economic downturn caused by President Donald Trump’s significant new tariffs on imports.
Trading was extremely volatile. Stocks in Japan plunged more than 8%, while South Korea tumbled about 5%. In Australia, stocks fell more than 6%.
Over the weekend, analysts circulated notes warning that Asia could be particularly vulnerable to a tit-for-tat exchange of retaliatory tariffs between China and the United States. Many countries in the region, including Japan and South Korea, count both nations as their top trading partners.
Trump doubled down Sunday evening, saying that he would not ease his tariffs on other countries “unless they pay us a lot of money.” He also dismissed concerns that his steep new taxes on imports will lead to higher prices. “I don’t think inflation is going to be a big deal,” he told reporters on Air Force One.
On Friday, China struck back at the United States with a 34% tariff on a number of U.S. exports, matching a 34% tariff that Trump imposed on China last week.
Early Monday, stock benchmarks in Hong Kong and Taiwan plunged about 10% when they started trading. Stocks in mainland China were down about half that amount.
Technology stocks across Asia were getting clobbered. Taiwan Semiconductor Manufacturing Co., the world’s largest chip manufacturer, was down nearly 10%, while Apple’s main contract manufacturer Foxconn, also plunged 10%. In Hong Kong, the Chinese technology giants Alibaba, Tencent and Xiaomi all tumbled.
South Korea’s Samsung Electronics, which makes much of its products in Vietnam, fell 4%. Japan’s Nintendo, which delayed preorders for the sequel to its bestselling Switch hand-held video game device, declined nearly 5%. The stock had fallen as much as 10% at the open of trade.
Futures on the S&P 500, which allow investors to bet on the index before the official start of trading in New York on Monday, dropped roughly 4% Sunday evening. In oil markets, prices fell more than 3% — adding to steep losses last week. And the price of copper, considered a broad economic indicator, slid more than 5%.
The 10.5% drop in the S&P 500 on Thursday and Friday was the worst two-day decline for the index since the onset of the coronavirus pandemic in 2020.
The only other instances of a worse two-day drop came during the 2008 financial crisis and the 1987 stock market crash, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. In dollar terms, the more than $5 trillion that was wiped out in the S&P’s value in the two days last week stands unmatched.
Even more unusual is that last week’s sell-off stemmed directly from presidential policy. Trump has so far brushed off concerns about the market reaction and potential economic consequences, showing little intention of backing down.
“If they’re maintained, the tariff hikes announced April 2 represent a self-inflicted economic catastrophe for the United States,” Preston Caldwell, senior U.S. economist for Morningstar Research Services, said in a blog post Friday. The historically high tariffs that Trump announced Wednesday caught investors, economists and businesspeople off guard, upending global economic forecasts.
CEOs have begun warning consumers that they should expect prices to increase on some groceries, clothes and other products. Consumers have said they intend to rein in spending on big-ticket items. Some auto companies have already announced production pauses overseas, as well as job losses domestically. Bank economists have raised the odds that a recession will hit the United States over the next 12 months. As countries responded last week with tariffs of their own, the sell-off in financial markets accelerated.
Hedge fund manager Bill Ackman said on the social media platform X on Sunday that he supported Trump’s attempt to fix global tariffs, but implored the president to call a “90-day time out” on Monday.
Otherwise, “we are heading for a self-induced, economic nuclear winter, and we should start hunkering down,” he said. “May cooler heads prevail.”
British Prime Minister Keir Starmer warned Saturday that “the world as we knew it has gone” and urged countries not to retaliate against the United States and enter a full-blown trade war.
The S&P 500 is now 17.4% below its peak reached in February, on course to enter a bear market, defined as a drop of 20% or more from a recent peak.
The Nasdaq composite index, which is chock-full of tech stocks that came under pressure as the sell-off accelerated last week, is already in a bear market, down almost 23% from its December peak. The Russell 2000 index of smaller companies that are more sensitive to the outlook for the economy has fallen more than 25% from its November peak.
Still, some investors remain cautiously optimistic that the solid economy from the start of this year will withstand the onslaught of high tariffs, before the president turns to tax cuts and deregulation to stimulate the economy and avoid a recession.
Treasury Secretary Scott Bessent said Sunday on the NBC program “Meet The Press” that he saw “no reason” to expect a recession.
Other analysts cautioned that the damage to the economy will depend on how long tariffs remain at elevated levels.
“We remain very cautious,” said Stuart Kaiser, an equity analyst at Citi. Even with last week’s drop, he said, markets may have further to fall because earnings and economic growth expectations remain “well above levels consistent with announced tariff levels.”
This article originally appeared in The New York Times.
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