Asian equities on Monday plummeted as markets were hit by the intensifying trade war between the United States and China.
China retaliated with hefty tariffs, further fueling fears of a potential recession. The sell-off on the trading floors was unprecedented, with Hong Kong’s market diving 10%, Tokyo briefly falling by 8%, and Taipei losing over 9%.
Futures for Wall Street also faced significant declines, while concerns about demand led to a slump in commodity prices.
Last week, U.S. President Donald Trump triggered a market meltdown by unveiling sweeping tariffs against US trade partners, claiming that the US had been “ripped off” for years, and stating that countries were lining up to negotiate with Washington.
Following the close of Asian markets on Friday, China announced that from April 10, it would impose retaliatory tariffs of 34% on all US goods.
The country also imposed export controls on seven rare earth elements, including gadolinium,used in MRIs and yttrium, which is crucial in consumer electronics.
Investors hoped Trump might reconsider his stance, but those hopes were dashed when he declared on Sunday that he wouldn’t make a deal with other countries unless trade deficits were resolved.
He denied intentionally causing the sell-off and maintained he couldn’t predict the market reactions.
“Sometimes you have to take medicine to fix something,” he said, referring to the market turmoil that wiped trillions of dollars off company valuations.
The sell-off in Asia affected every sector, with technology firms, automakers, banks, casinos, and energy companies all experiencing severe losses.
Among the worst-hit were Chinese e-commerce giants Alibaba, which plummeted by over 14%, and JD.com, which lost 13%. Japanese tech investment giant SoftBank dropped by more than 10%, and Sony saw a 9.6% decline.
The impact extended to other regions, with Shanghai falling by more than 6%, Singapore shedding 8%, and Seoul giving up over 5%, triggering a sidecar mechanism to temporarily halt some trading for the first time in eight months. Sydney, Wellington, Manila, and Mumbai also suffered heavy losses.
Chief Asia-Pacific Economist at Moody’s Analytics, Steve Cochrane, warned, “We could see a recession happen very quickly in the US, and it could last through the year or so, it could be rather lengthy. And if there’s a recession in the US, of course, China will feel it as well because demand for its goods will be hit even harder.”
Concerns about demand caused oil prices to drop more than 3% on Monday, following a 7% decline on Friday. Both main contracts are now at their lowest levels since 2021.
Copper, an essential material for energy storage, electric vehicles, and renewable energy systems, continued its downward trend.
“The market is in free-fall mode again, punching through floors,” said Stephen Innes from SPI Asset Management. “Trump’s team isn’t blinking. The tariffs are being treated as a victory lap, not a bargaining chip.”
These losses followed another rough day on Wall Street on Friday, with all three major indexes dropping almost 6%.
Federal Reserve Chairman, Jerome Powell, noted that US tariffs could push inflation higher and slow growth, warning of an “elevated” risk of increased unemployment.
Trump’s trade policies have created a headache for central bankers, who are struggling to balance the need for interest rate cuts with the goal of keeping inflation in check.
Tim Waterer, Chief Market Analyst at KCM Trade, observed, “Traders are nervously watching the two biggest economies going toe to toe on tariffs and are fearing that both could receive knockout blows from a prolonged economic fight. Neither the US nor China are backing down when it comes to slapping new tariffs on each other and in this escalatory environment, it’s not surprising to see that risk assets are being avoided like the plague.”
Key figures around 0400 GMT:
Tokyo – Nikkei 225: DOWN 6.2% at 31,699.95
Hong Kong – Hang Seng Index: DOWN 10.7% at 20,405.96 (break)
Shanghai – Composite: DOWN 6.3% at 3,130.17 (break)
West Texas Intermediate: DOWN 2.7% at $60.31 per barrel
Brent North Sea Crude: DOWN 2.7% at $63.84 per barrel
Dollar/yen: DOWN at 146.33 yen from 146.98 yen on Friday
Euro/dollar: DOWN at $1.0950 from $1.0962
Pound/dollar: DOWN at $1.2889 from $1.2893
Euro/pound: DOWN at 84.96 pence from 85.01 pence
Markets:
New York – Dow: DOWN 5.5% at 38,314.86 (close)
London – FTSE 100: DOWN 5.0% at 8,054.98 (close)
