Asian governments expressed relief following U.S. President Donald Trump’s decision to pause a significant number of reciprocal tariffs for 90 days, allowing time for discussions with several of the U.S.’s key trading partners, except for one notably absent from this negotiation window. A new 125% tariff was imposed on Chinese goods due to what Trump described as Beijing’s “lack of respect.”
This move influenced financial markets, with Japan’s Nikkei 225 index experiencing a 9.1% increase on Thursday. South Korea’s KOSPI rose by 6.6%, Taiwan’s Taiex jumped by 9.3%, and Australia’s S&P/ASX 200 saw a 4.6% rise. However, these indices have not yet returned to levels seen before the “Liberation Day” announcement by Trump, which had a disruptive effect on governments, companies, and markets internationally.
Despite the high tariffs on Chinese goods, markets in China also saw slight improvements. The Hang Seng Index in Hong Kong rose 2.1%, marking its third consecutive day of gains after experiencing a severe drop on Monday, its most significant decrease since 1997. The CSI 300 increased by 1.3%.
In Southeast Asia, which was subjected to some of Trump’s most substantial “Liberation Day” tariffs, market indices also improved. Vietnam’s VN-Index rose by 6.8%, alleviating concerns that its export-dependent economy would be severely impacted by a 46% tariff.
Although Trump enacted a pause, the average U.S. tariff rates remain at their highest since the 1930s. Apart from the 125% tariff on China, a general 10% tariff applies to all U.S. imports, along with 25% tariffs on imported cars, steel, and aluminum.
There is also the looming possibility of a 25% tariff on countries utilizing Venezuelan oil. Additional threats have been made regarding tariffs on imported pharmaceuticals and semiconductors.
Had the full “Liberation Day” tariffs remained in place, the average U.S. tariff rate would have escalated to 27%, according to Bloomberg estimates. Post-pause, the rate stands reduced to 24%, still significantly elevated compared to the pre-Trump average of 2%.
Nations such as South Korea, Japan, and Australia continue to face challenges due to a more protectionist U.S., even as they seek permanent relief from “reciprocal tariffs.” Japan and South Korea are significant car exporters, while Australia provides steel to the U.S.
Trump’s pause complicates the perceived objectives of these tariffs. Since “Liberation Day,” senior figures like Commerce Secretary Howard Lutnick and Senior Trade Advisor Peter Navarro justified the tariffs as measures to boost U.S. manufacturing and correct trade imbalances with exporters. Yet, the administration’s narrative has shifted, positioning tariffs as leverage to negotiate new trade deals with partners such as Japan, Korea, and Vietnam, aiming to isolate China. Treasury Secretary Scott Bessent remarked that Trump had strategically “goaded China into a bad position.”
The pause triggers a three-month window for Trump’s trade partners to reach new agreements. Shortly after, Vietnam announced plans to begin trade negotiations with the U.S. and explore the removal of non-tariff barriers. Taiwan is contemplating a purchase of $200 billion worth of U.S. products, particularly liquified natural gas, to mitigate its trade surplus.
Negotiations involving Japan and South Korea are also ongoing, focusing on reducing reciprocal tariffs and the 25% tariff on imported cars.
The situation with China remains uncertain. Trump recently suggested that China might be seeking a deal and hinted at halting further tariff increases on Chinese products.
China has responded with 84% tariffs on U.S. goods, part of its retaliatory measures against Trump’s reciprocal tariffs.
Deutsche Bank noted that the risk of a disorderly economic separation between the U.S. and China persists, with no immediate signs of de-escalation from either side. Chinese leadership is convening to discuss economic stimulus measures to counteract the impact of Trump’s tariff threats, including support for technology and consumer spending.
Goldman Sachs revised its 2025 GDP growth forecast for China from 4.5% down to 4.0%, anticipating that up to 20 million workers could be affected by diminishing U.S.-bound exports. The combined pressures of Trump tariffs, declining U.S. exports, and slower global economic growth are likely to significantly pressure China’s economy and job market.
