Asian market slide on trade tensions

[WORLD] Asian stock markets recorded steep declines Friday as mounting tensions between the United States and China reignited fears of a prolonged trade conflict, shaking investor confidence across the region. The renewed uncertainty follows a series of aggressive policy signals from both Washington and Beijing, escalating worries about global supply chain disruptions and economic slowdown.

Tariff Threats Shake Confidence

Investors were spooked by reports that the U.S. is considering a fresh round of tariffs on Chinese goods, potentially targeting sectors like semiconductors, electric vehicles, and rare earth materials. This comes on the heels of recent comments from U.S. officials suggesting a hardline approach toward Chinese industrial policy and technology access.

President Joe Biden’s administration has not formally announced the measures, but sources familiar with the deliberations told that tariffs could reach as high as 60% on key Chinese exports. The move is widely interpreted as an effort to protect domestic industries and reduce dependency on China, especially in strategic sectors.

Major Indexes in the Red

Japan’s Nikkei 225 plunged 5.6%, its steepest daily drop since October 2022. The decline was driven by tech-heavy losses and a strengthening yen, which pressured export-oriented stocks.

• Hong Kong’s Hang Seng Index fell 1.8%, weighed down by declines in property and tech shares.
• China’s Shanghai Composite dipped 0.9% as investors braced for possible retaliatory measures from Beijing.
• South Korea’s Kospi shed 1.3%, with chipmakers among the hardest hit.
• Australia’s ASX 200 lost 1.2%, dragged lower by mining and financial stocks.

Only Taiwan’s Taiex Index bucked the regional trend, rising 1.5% amid expectations that supply chain shifts might benefit the island’s semiconductor sector.

Global Market Ripples

The selloff extended beyond Asia, with U.S. stock futures turning negative ahead of the Friday session. The S&P 500 and Nasdaq Composite had already posted losses earlier in the week, reflecting broader anxiety about tightening financial conditions and global trade instability.

“Markets are pricing in a scenario where decoupling between the U.S. and China becomes the new norm,” said Priya Nair, senior strategist at HSBC Global Markets. “That has implications not just for trade, but for capital flows, technology investment, and geopolitical risk.”

Tech Sector in the Crosshairs

Technology stocks bore the brunt of the downturn, with investors anticipating that U.S. export controls could further limit the flow of high-end semiconductors and manufacturing equipment to China. Companies like Tokyo Electron and SK Hynix saw sharp losses amid speculation that new rules may affect their Chinese clients.

Analysts also highlighted the risk of retaliatory action from China, which could include sanctions on U.S. firms operating in the country or restrictions on rare earth mineral exports, crucial for electronics and defense production.

Beijing Responds with Caution

China’s Ministry of Commerce issued a statement calling the proposed U.S. tariffs “unilateral and protectionist,” warning that Beijing “reserves the right to take necessary countermeasures.” However, Chinese officials stopped short of announcing any specific retaliation, suggesting a wait-and-see approach ahead of potential diplomatic talks.

“We urge the U.S. to return to rational dialogue and avoid actions that will harm both economies,” the ministry said.

A Volatile Road Ahead

With U.S. elections on the horizon and bipartisan support growing for a tougher China stance, investors and multinational corporations are bracing for continued volatility. Global supply chains, particularly in technology and green energy, remain highly sensitive to trade policy shifts.

Central banks in the region may also find themselves in a difficult position. While inflation is moderating in many Asian economies, the market turbulence may force policymakers to consider monetary stimulus to stabilize growth.

What to Watch Next

• Possible formal announcement of U.S. tariffs in coming weeks.
• China’s response, including trade or regulatory actions.
• Market performance in the U.S. and Europe as global risk sentiment evolves.
• Corporate earnings reports from major tech exporters in Asia.

Friday’s market turmoil reflects the growing uncertainty surrounding the future of U.S.-China trade relations. As both sides harden their positions, the likelihood of prolonged disruption looms large — not only for Asian economies but for the broader global financial system.