Asian shares experienced a further decline on Friday following U.S. President Donald Trump’s announcement of tariffs, which caused significant concern on Wall Street, echoing the market turmoil last seen during the COVID-19 pandemic in 2020.
The tariffs led to a widespread decrease in the value of various assets, including crude oil, Big Tech stocks, and the U.S. dollar against other currencies. Even gold, which is traditionally considered a safe investment, saw a decline after reaching record highs. Economists have warned that these tariffs, described by Trump as part of a “Liberation Day” initiative, could lead to a challenging combination of slower economic growth and increased inflation.
Due to holidays, markets in Shanghai, Taiwan, Hong Kong, and Indonesia were closed, limiting the impact of the sell-offs in these regions. However, the financial markets in Japan and South Korea were affected, with Tokyo’s Nikkei 225 dropping 4.3% to 33,263.58 and South Korea’s Kospi decreasing by 1.8% to 2,441.86. These countries expressed a focus on negotiating reductions in tariffs with the Trump administration. Additionally, Australia’s S&P/ASX 200 decreased by 2.2% to 7,684.30.
On Friday, the U.S. dollar fell to 145.39 Japanese yen from 146.06. Generally seen as a safe currency in uncertain times, the yen’s value rose amid efforts by Trump’s policies to weaken the dollar to make U.S.-produced goods more competitive internationally. The euro strengthened slightly from $1.1055 to $1.1095.
President Trump announced a minimum tariff of 10% on global imports, with higher rates for products from specific countries such as China and those from the European Union. Countries in Asia that are smaller and economically challenged faced tariffs as high as 49%. According to UBS, the combined effect of these tariffs, not seen at such a level for over a century, could reduce U.S. economic growth by 2% this year and increase inflation to nearly 5%.
Strategist Bhanu Baweja and others at UBS believe it’s unlikely these tariffs will remain in place due to their potential economic impact. Trump has stated in the past that the tariffs might cause some economic disruption. Despite these concerns, he expressed optimism, claiming the markets, stocks, and the U.S. economy would thrive.
In the U.S., the S&P 500 index dropped by 4.8% to 5,396.52, the Dow Jones Industrial Average fell 4% to 40,545.93, and the Nasdaq composite decreased by 6% to 16,550.61. Smaller U.S. companies faced significant impacts, with the Russell 2000 index falling by 6.6%, placing it more than 20% below its record high.
Four out of five companies in the S&P 500 saw declines, particularly those like Best Buy, which fell 17.8% due to its global product sourcing. United Airlines dropped by 15.6%, reflecting fears that economic uncertainties might reduce business travel and consumer vacation bookings. Target’s shares fell by 10.9%, driven by concerns that customers, already affected by high inflation, might face increased financial pressure.
While investors were aware of Trump’s planned tariffs, expectations varied, with some analysts predicting these tariffs might be used for negotiation rather than as a long-term policy. Trump has indicated intentions to use them to promote U.S. manufacturing jobs, a process that could take years.
Though the Federal Reserve could potentially cut interest rates to bolster the economy, such action may elevate inflation levels at a time when U.S. households are preparing for increased living costs due to the tariffs.
Treasury yields saw a decline, partly in response to anticipated interest rate cuts and concerns about the U.S. economy’s health. The yield on the 10-year Treasury fell to 4.04% from 4.20% on Wednesday and from about 4.80% in January.
In employment news, the latest report indicated fewer U.S. workers applied for unemployment benefits last week than economists had expected. Additionally, activity in the U.S. services industry showed growth, albeit at a slower pace than forecasted.
Early Friday trading also saw U.S. benchmark crude oil prices decrease by 70 cents to $66.25 a barrel, while Brent crude, a global standard, dropped by 64 cents to $69.50 a barrel.
