On Monday, a wave of sales, investors and economists struggled to deal with the rising chances of a severe recession caused by President Trump’s major new tariffs on imports.
Trading is extremely volatile. Japanese stocks fell more than 8%, while South Korea fell about 5%. In Australia, stocks fell by more than 6%.
Last weekend, analysts issued notes warning that Asia could be particularly vulnerable to exchanges of retaliatory tariffs between China and the United States. Many countries in the region, including Japan and South Korea, see both countries as their main trading partners.
President Trump doubled Sunday night, saying he would not impose tariffs on other countries, “unless they pay a lot.” He also refuted his concern that high taxes on imports would lead to higher prices. “I don't think inflation is going to be very big,” he told Air Force One reporter.
China returned to the U.S. at a 34% U.S. export tax rate on Friday, matching the 34% tariff Trump imposed on China last week.
On Monday, Hong Kong and Taiwan’s stock benchmarks soared about 10% when trading began. Stocks in mainland China fell by about half.
Technology inventory in Asia is getting bigger and bigger. Taiwan’s semiconductor manufacturing company is the world’s largest chip maker, down nearly 10%, while Apple’s main contract maker Foxconn also fell 10%. In Hong Kong, Chinese technology giants Alibaba, Tencent and Xiaomi all fell.
South Korea's Samsung Electronics produces most of its products in Vietnam, down 4%. Japan's Nintendo delayed the sequel to a nearly 5% drop in pre-orders for its best-selling switched handheld video game devices. The stock fell 10% in public trade.
Futures for the S&P 500, which allowed investors to bet the index before the official start of New York on Monday, fell about 4% on Sunday night. In the oil market, prices fell more than 3% – adding huge losses last week. The price of copper is considered a broad economic indicator, gliding over 5%.
The 10.5% decline in the S&P 500 on Thursday and Friday was the worst two-day decline in the index’s decline since the 2020 coronavirus pandemic.
Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, said the only other two-day worsening situation during the 2008 financial crisis and the 1987 stock market crash were in the 2008 financial crisis and the 1987 stock market crash. By the dollar, more than $5 trillion was removed from the value of Standard & Poor’s in the past two days.
What’s even more unusual is that last week’s sell-off stemmed directly from presidential policies. So far, Mr. Trump has raised concerns about market reactions and potential economic consequences, with little intention to back down.
“If they are maintained, tariff hiking announcements represent the economic disaster that the U.S. has caused,” Preston Caldwell, senior economist at Morningstar Research Services, said in a blog post on Friday.
Mr. Trump announced on Wednesday that historically high tariffs caught investors, economists and businessmen off guard and raised global economic forecasts.
The CEO has begun warning consumers that they should expect prices for certain groceries, clothing and other products to rise. Consumers say they intend to control large items. Some auto companies have announced production suspensions overseas and their lives are being killed at home. Bank economists have proposed a chance that a recession will hit the United States in the next 12 months. Selling in financial markets has accelerated as countries responded last week with their own tariffs.
Hedge fund manager Bill Ackman said on social media platform X on Sunday that he supported Mr. Trump's attempt to address global tariffs, but implored the president to call for “90 days” on Monday.
Otherwise, “we’re heading to a self-inducing nuclear winter and we should start working on it,” he said. “The likely colder head prevails.”
British Prime Minister Keir Starmer warned on Saturday that “the world we know has disappeared” and urged countries not to retaliate against the United States and launch a full-scale trade war.
Currently, the S&P 500 is now down 17.4% from its February peak, currently entering a bear market of course, defined as a 20% or more decline from its recent peak.
The NASDAQ Composite Index is full of tech stocks sold out last week, an acceleration in the sell-out, already in a bear market, down nearly 23% from its December peak. The Russell 2000 index of smaller companies, which are more sensitive to the economic outlook, fell 25% from its peak in November.
Still, some investors remain cautiously optimistic that a stable economy starting early this year will withstand high tariffs before the president turns to tax cuts and deregulation to stimulate the economy and avoid recession.
Treasury Secretary Scott Bessent said on NBC's plan to “meet the press” on Sunday that he saw “no reason” to expect a recession.
Other analysts warn that the damage to the economy will depend on the longer the tariffs are at higher levels.
“We are still very cautious,” said Stuart Kaiser, a stock analyst at Citigroup. Even if the decline last week, the market could fall further, as earnings and economic growth expectations “are much higher than the announced tariff levels.”
Tony Romm Contribution report.
