Asian Markets Slip as Trump Rekindles Tariff Threats, Raising Trade Tensions Across the Region

Asian equity markets retreated sharply on Thursday following renewed tariff threats from former U.S. President Donald Trump, who announced plans to formally notify key U.S. trading partners within two weeks of pending unilateral trade actions. The move, which signals a return to aggressive protectionist rhetoric, rattled investor confidence across the Asia-Pacific region, particularly in export-driven economies already navigating a fragile global economic landscape.

Markets in Tokyo, Seoul, and Hong Kong led the declines, with the Nikkei 225 falling by 1.2%, the Kospi shedding 0.9%, and the Hang Seng Index sliding 1.5%. India’s Sensex remained largely flat, buffered by its relatively lower direct trade exposure to the U.S.

The sell-off was prompted by Trump’s announcement that the U.S. would issue formal letters warning of impending tariffs, unless trading partners move swiftly to conclude favorable bilateral trade agreements. The tone of the announcement signaled a hardline stance likely to complicate global supply chains and multilateral trade norms. However, the immediate threat was partially softened by U.S. Treasury Secretary Scott Bessent, who clarified that the administration might extend the current 90-day suspension of reciprocal tariffs for countries demonstrating “good faith” in ongoing negotiations.

“The contrast in tone between the White House and the Treasury Department adds a layer of ambiguity to U.S. trade policy, which investors interpret as elevated uncertainty,” said Noriko Tanaka, head of Asia macro strategy at Nomura Securities. “Markets are adjusting quickly to the likelihood of protracted trade disputes.”

The risk-sensitive sectors in Japan and South Korea were hit hardest, especially large-cap electronics and automotive manufacturers that rely heavily on U.S. demand. Shares of Toyota and Honda fell by more than 2%, while chipmakers like SK Hynix and Samsung Electronics saw intraday losses nearing 3%.

China’s offshore yuan briefly strengthened to 7.18 against the U.S. dollar before retracing, as currency traders responded to potential capital flight and shifts toward regional safe havens. The Japanese yen also appreciated marginally, consistent with its role as a refuge asset in times of market distress.

Beyond equity and currency markets, the ripple effects could weigh on GDP growth projections for Asia-Pacific economies. Economists at the Asian Development Bank estimate that if reciprocal tariffs are implemented later this year, economies with high export dependence on the U.S.—such as South Korea and Vietnam—could see a 0.5% to 0.7% decline in 2025 GDP growth relative to current baselines.

“This isn’t just about tariffs—it’s about what they signal: the possible dismantling of what remains of multilateral trade norms,” said Dr. Liu Cheng, professor of international economics at Peking University. “If each country moves toward bilateral coercion, smaller economies will face asymmetrical pressures with little institutional recourse.”

Still, supporters of Trump’s stance argue that unilateral trade measures are an effective lever for recalibrating trade relationships that have long been skewed against American producers. “Tariffs are not an end, but a negotiation tool,” said Todd Mercer, senior fellow at the American Enterprise Institute. “The message to trading partners is: deal now, or face consequences.”

But analysts warn that even short-term threats of tariffs can have immediate adverse effects on investment planning, inventory cycles, and forward guidance. The uncertainty alone may prompt firms to delay capital expenditure or hedge against unfavorable terms, creating broader market drag.

The coming weeks will be critical. Should the U.S. follow through with formal tariff notices without diplomatic de-escalation, Asian markets could see further outflows and currency adjustments. Investors will be closely watching for clarifications from Treasury officials or signs of coordinated response from U.S. trade partners, particularly in East Asia.

For now, volatility appears set to remain elevated as the region braces for yet another round of tariff brinkmanship—underscoring the fragility of the global economic recovery and the enduring ripple effects of political uncertainty.

Sources

• IMF (2024) World Economic Outlook

• Bloomberg Terminal (2025) Market Movements Summary – Asia

• WTO (2023) Trade Policy Review: United States

• Reuters (2025) Asia Stocks Dip on Trade Concerns