Hang Seng Index and Nikkei 225: Tariff Shock Triggers Selloff in Asia Markets

US Markets Hold Gains Before Tariff Shock Hits Futures

US equity markets posted gains on Wednesday, April 2, as investors awaited President Trump’s tariff announcements. The Nasdaq Composite Index rose 0.87%, while the Dow and the S&P 500 gained 0.56% and 0.67%, respectively. However, sentiment deteriorated sharply early Thursday, April 3, trading after Trump announced tariff hikes. Dow Jones Futures tumbled 822 points, and the Nasdaq 100 Futures sank 626 points.

Trump Unveils Sweeping Tariffs, Markets React

On Wednesday, President Trump unveiled tariff hikes that overshadowed upbeat US economic data, triggering a flight to safety on Thursday, April 3.

Key tariff increases included:

• China: 34%, raising total US tariffs to 64%.
• Taiwan: 32%.
• South Korea: 30%.
• Japan: 24%.
• EU: 20%
• A 10% baseline tariff for all countries.

The sharp rise in tariffs on Chinese goods intensified fears of a broader US-China trade war.

Asian Market Implications: Markets opened with steep losses in Asia on April 3 following the US announcement, particularly in export-heavy economies.

Hang Seng Index Slips as Tech Bears the Brunt

In Asia, the Hang Seng Index slid by 1.58% on Thursday morning as investors reacted to Trump’s tariff announcements. The tariff hike on Chinese goods overshadowed an upbeat China Caixin Services PMI report, which hinted at the effectiveness of Beijing’s stimulus efforts.

Tech stocks led the losses, with China’s automakers feeling the full force of the tariff hikes.

• The Hang Seng Technology Index fell 2.22%.
• Tech giant Alibaba (09988.HK) tumbled 5.15%, while Baidu (09888.HK) slid by 2.22%.
• Li Auto Inc. (02015.HK) dropped 2.20%, while NIO Inc. (09866.HK) posted a 3.20% loss. BYD Co. Inc. (01211.HK) fell 2.10%.

Mainland China’s equities also trended lower but faced less intense selling pressure, with the CSI 300 and Shanghai Composite Index falling 0.71% and 0.51%, respectively. Hopes of new stimulus measures aimed at boosting domestic consumption and China’s ongoing transition to a consumption-led economy cushioned the losses.

Brian Tycangco, editor/analyst at Stansberry Research, commented:

“Knee jerk reaction to Trump’s Liberation Day Tariffs seen in HKExGroup, but many stocks are already well off the lows. I’m expecting something out of Beijing soon. If this market ends up well above its lows of the day today or even green, it’s very bullish.”

Nikkei 225 Plunges on Yen Strength and Tariffs

The Nikkei Index fell 3.21% on Thursday morning as investors digested the 24% US tariff hike on Japan and surge in demand for the Japanese Yen. The USD/JPY tumbled 1.11% to 147.537 in the morning session, further pressuring the appetite for Japanese stocks. A stronger Yen adversely affects overseas earnings and competitiveness. The combination of a stronger Yen and tariffs exacerbated buyer appetite.

Nissan Motor Corp. (7201) slid 4.18%, Sony Corp. (6758) tumbled 5.23%, while Softbank Group (9984) declined 3.78%, reflecting investor sentiment toward the US tariffs.

ASX 200 Tumbles, but Gold Stocks Shine

Australia’s ASX 200 dropped 0.90% on Thursday morning, tracking the plunge in US futures. Mining and tech stocks led the losses, while gold stocks provided some support.

• BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) slid 2.90% and 2.94%, respectively. Iron ore dropped 0.46% on Thursday morning after falling 0.44% on Wednesday, pressuring mining stocks.
• The S&P/ASX All Tech Index fell 1.19%, mirroring the Nasdaq 100 Futures’ losses.
• In contrast, Northern Star Resources (NST) rallied 2.24%. Gold rallied to a Thursday morning high of $1,3168, driving NST shares higher.

Outlook: Tariff Escalation and Central Bank Commentary Key

Tariff tensions will likely dominate risk sentiment in the near term. Retaliatory measures could further impact global equity markets. China’s policy response may include targeted stimulus to offset trade shocks.

Investors should also monitor central bank commentary, as Trump’s tariffs may shift expectations around the Fed’s policy path.

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