Asian stocks declined following President Donald Trump’s decision to impose a 25% tariff on U.S. auto imports. The move raised concerns about economic growth, prompting investors to reduce their exposure to riskier assets. Shares of major automakers suffered losses.
Equity indexes in Japan, South Korea, and Australia fell, while markets in Hong Kong and India posted gains. U.S. stock futures indicated a stable opening, whereas European futures pointed to a weaker start. The Mexican peso also dropped after the tariff announcement, alongside declines in shares of Toyota Motor Corp., General Motors Co., and Ford Motor Co. The U.S. dollar weakened after Trump suggested reciprocal tariffs would be lenient.
Uncertainty Over Trade Policy Adds to Market Volatility
Trump’s shifting stance on trade restrictions has added to market instability. Investors are struggling to gauge the long-term impact on global trade and economic growth. Just two months into his presidency, investor sentiment has turned cautious as the Federal Reserve signals a more measured approach to interest rate adjustments.
“Tariff-related headlines have once again rattled market confidence across the region,” said Jun Rong Yeap, a market strategist at IG Asia. “With investors linking tariffs to higher recession risks, any form of trade restriction may trigger an initial rush to the exit—what we’re seeing in today’s session.”
Trump officially signed the order imposing the 25% tariff on all non-U.S.-made vehicles. According to his proclamation, the tariffs will take effect at 12:01 a.m. Washington time on April 3.
Lenient Reciprocal Tariffs and Potential TikTok Deal
Despite the aggressive tariff stance, Trump suggested that upcoming reciprocal duties would be “very lenient.” He also hinted at a possible tariff reduction for China, which could be linked to a deal allowing an American company to acquire ByteDance Ltd.’s TikTok.
The U.S. dollar fell against all Group-of-10 currencies as Trump played down the severity of the reciprocal tariffs. The yield on 10-year U.S. Treasuries also dipped in Asian trading, reversing gains from the previous session.
Trump “could be recognizing that his trade policies might be having a ricocheting effect on U.S. consumers and business owners,” said Fiona Lim, a senior strategist at Malayan Banking Bhd in Singapore. “That makes U.S. dollar gains susceptible to reversal.”
China’s Industrial Sector Struggles Amid Tariff Concerns
Adding to economic worries, profits at China’s industrial firms contracted at the start of 2025. Analysts see this as a troubling sign, as the prospect of higher U.S. tariffs looms over Chinese exports.
Meanwhile, India’s BSE Sensex extended its winning streak, posting its eighth gain in nine sessions. Analysts at Eastspring Investments predict a stronger second half for the Indian equity market, driven by fiscal support from the government and expected interest rate cuts.
“The government seems to be putting more capital to work,” said Alexander Davey, head of client portfolio managers at Eastspring, in an interview with Bloomberg TV. “We had that February cut, and we could see further cuts coming down the line. The second half of the year looks supportive for Indian markets.”
Liquidity Concerns and Federal Reserve Caution
Worries over global trade tensions have reduced liquidity in U.S. stocks, creating challenges for institutional investors and increasing market volatility. Data from Deutsche Bank AG shows that liquidity in S&P 500 stock-index futures is at a two-year low.
Federal Reserve Bank of St. Louis President Alberto Musalem cautioned that the effects of tariffs might not be temporary. He warned that secondary economic impacts could prompt the Fed to hold interest rates steady for an extended period.
“While we believe higher U.S. tariffs will weigh on the economy, we do not predict a U.S. recession,” said Carol Kong, a strategist at Commonwealth Bank of Australia. “That said, market participants may still price in a higher risk of recession as more tariffs are announced, which could push the dollar higher against major currencies.”
Commodities React as Oil Holds Gains and Gold Nears Record High
In commodity markets, oil prices remained stable after U.S. crude inventories recorded their largest drop since December. Meanwhile, gold prices held near record highs as investors sought safe-haven assets amid growing economic uncertainty.
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