Asian markets experienced further declines on Friday following the announcement of U.S. President Donald Trump’s tariffs, which caused significant disruptions in Wall Street, reminiscent of the shocks felt during the COVID-19 pandemic’s impact on global markets in 2020.
The repercussions of the tariffs were widespread, affecting everything from crude oil and major technology stocks to the U.S. dollar’s value against other currencies. Even gold, traditionally seen as a safe haven and which had recently reached record highs, saw a decline after Trump revealed his “Liberation Day” tariffs. Economists have cautioned that these tariffs could potentially lead to a challenging mix of reduced economic growth and increased inflation.
Certain markets in Asia, including those in Shanghai, Taiwan, Hong Kong, and Indonesia, were closed for holidays, which helped mitigate the extent of Friday’s sell-offs in the region.
Japan’s Nikkei 225 fell by 4.3% to 33,263.58, and South Korea’s Kospi decreased by 1.8% to 2,441.86. Both countries, allies of the U.S., expressed their intentions to negotiate lower tariffs with Trump’s administration. Meanwhile, Australia’s S&P/ASX 200 saw a 2.2% drop to 7,684.30.
In early Friday trading, the U.S. dollar decreased in value to 145.39 Japanese yen from 146.06. The Japanese yen is often seen as a safe asset in uncertain times, while the dollar’s weakening policy by Trump’s government aims to increase the competitiveness of U.S.-made goods abroad. The euro increased slightly, reaching $1.1095 from $1.1055.
Trump introduced a minimum tariff of 10% on global imports, with significantly higher rates applied to products from certain countries, like China and the European Union. Some Asian countries, particularly the smaller and poorer ones, faced tariffs as high as 49%.
UBS analysts noted that the collective impact of these tariffs, levels not seen in over a century, could potentially reduce U.S. economic growth by 2 percentage points this year and drive inflation close to 5%. The impact is considered significant enough to cast doubt on the likelihood of the tariffs remaining.
Trump had previously minimized the potential economic and market impacts of tariffs, describing them as causing “a little disturbance.” On Thursday, he reiterated his positive outlook, asserting that the markets, stocks, and the country would flourish.
U.S. stock indices responded with significant declines. The S&P 500 fell 4.8% to 5,396.52, the Dow Jones Industrial Average dropped 4% to 40,545.93, and the Nasdaq composite decreased by 6% to 16,550.61. Smaller U.S. companies suffered major losses, with the Russell 2000 index of smaller stocks dropping 6.6% to over 20% below its record.
Best Buy’s stock fell 17.8% due to its globally manufactured electronics, while United Airlines lost 15.6% as concerns about the global economy’s impact on business and leisure travel grew. Target also saw a 10.9% decline, as fears intensified regarding its customer base, already strained by high inflation, facing further financial pressure.
Investors had anticipated Trump’s announcement of widespread tariffs, contributing to the S&P 500 index dipping 10% below its record high prior to the announcement. While some analysts and investors speculated that Trump might use tariffs primarily as a negotiation tool, he conveyed that he views them as a strategy to bring manufacturing jobs back to the United States, which could take years.
The Federal Reserve might consider reducing interest rates to support the economy, though such cuts could further drive inflation at a time when U.S. households are already preparing for significant increases in their expenses due to the tariffs.
Treasury yields fell amid rising expectations of coming rate cuts and broader concerns about the U.S. economy. The yield on the 10-year Treasury decreased to 4.04% from 4.20% late Wednesday, down from about 4.80% in January.
A report Thursday indicated a reduction in U.S. unemployment benefit claims last week, exceeding economists’ expectations. Another report showed growth in the U.S. services industry, including transportation and finance sectors, although the expansion was below forecasts.
Additionally, early Friday saw a decline in U.S. benchmark crude oil prices by 70 cents to $66.25 per barrel, while Brent crude, the international standard, dropped by 64 cents to $69.50 per barrel.
