Hang Seng Index and Nikkei 225: Tech and Auto Stocks Slide as Trade War Escalates

US Markets Tumble as China Retaliates

US equity markets plunged on Friday, April 4, as China retaliated against Trump’s tariff hikes and Fed Chair Powell’s wait-and-see stance. The S&P 500 and the Nasdaq Composite Index tumbled 5.97% and 5.82%, respectively, while the Dow slid 5.50%, marking the worst sell-off since the global pandemic in March 2020.

Fed Chair Powell’s comments and trade developments overshadowed an upbeat US Jobs Report. Powell warned that tariffs would impact inflation more than expected, supporting a wait-and-see approach to policy.

Tariff Developments: China Responds With 34% Tariffs and Broader Measures

On April 4, China announced a series of countermeasures in response to President Trump’s 34% tariff hike on Chinese goods, including:

• Blocking the TikTok sale to the US. The sale is a potential pre-requisite for Trump to lower tariffs.
• Imposing a 34% tariff on US goods, effective April 10.
• Suspending import licenses for select US companies.
• Restricting rare earth exports.

China’s response spooked markets that hoped the US and China could avoid a full-blown trade war.

Asian Market Implications: Markets opened with heavy losses in Asia on April 7 as trade tensions continued fueling safe-haven demand.

Hang Seng Index Reopens with a Crash

In Asia, the Hang Seng Index reopened after Friday’s Ching Ming Festival, plunging 9.28% on Monday morning amid rising trade tensions. Auto and tech stocks bore the brunt of the sell-off.

• The Hang Seng Technology Index fell 11.15%.
• Tech giant Alibaba (09988.HK) plummeted 12.55%, while Baidu (09888.HK) was down 12.07%.
• Li Auto Inc. (02015.HK) dropped 9.74%, while NIO Inc. (09866.HK) posted a 12.52% loss. BYD Co. Inc. (01211.HK) tumbled 13.29%.

Mainland China’s equities also faced selling pressure as sentiment toward China’s economic outlook waned. The CSI 300 and Shanghai Composite Index fell 4.82% and 4.86%, respectively. On April 7, CN Wire reported that Goldman Sachs expects a new 34% tariff to lower China’s GDP by at least 0.7 percentage points in 2025.

Despite the market gloom, hopes of new stimulus measures linger. Markets expect fresh stimulus to boost domestic consumption, supporting China’s ongoing transition to a consumption-led economy.

Brian Tycangco, editor and analyst at Stansberry Research, commented on speculation about potential PBoC monetary policy support, stating:

“China still has levers to pull as the world economy teeters on the brink.”

Nikkei 225 Plunges as Yen Demand Rises on Recession Worries

The Nikkei Index slumped 7.79% on Monday morning amid mounting recession fears and a stronger Yen. 10% baseline US tariffs took effect on Saturday, April 5, underscoring the US administration’s commitment to rebalancing trade terms.

The USD/JPY extended last week’s losses, falling 0.85% to 145.655, weighing on Japanese stocks. Higher tariffs and a stronger Yen impact overseas earnings and competitiveness, affecting buyer appetite for Japanese stocks.

In Japan, recession fears and currency strength intensified sell-offs across sectors. Softbank Group (9984) and Tokyo Electron (8035) plunged 11.63% and 10.44%, respectively. Nissan Motor Corp. (7201) dropped 6.76%, while Sony Corp. (6758) slid 9.45%, reflecting concerns about the effect of the US tariff on global demand.

ASX 200 Tracks Global Sell-Off

Australia’s ASX 200 fell 6.28% on Monday morning, following sharp declines on Wall Street and weaker US futures. While the losses were broad-based, banking and mining faced the heaviest selling.

• BHP Group Ltd. (BHP) and Fortescue Metals Group Ltd. (FMG) tumbled 8.15% and 8.22%, respectively. Iron ore spot prices fell 3.96% on demand concerns.
• Commonwealth Bank of Australia (CBA) slid by 7.22%, while Westpac Banking Corp. (WBC) dropped 7.45% on recession fears.

Outlook: Trade Retaliations and Central Bank Signals in Focus

Markets will remain sensitive to further trade retaliation and US responses in the coming days. Meanwhile, policy measures from Beijing could soften the impact on Hong Kong and Mainland China-listed stocks.

Investors should also monitor central bank commentary, as Trump’s tariffs could influence the Fed’s policy path.

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