Asian equity markets experienced a significant decline on Monday following US President Donald Trump’s threats to impose additional tariffs on China. The Hang Seng Index in Hong Kong plummeted 3.49 percent to 25,373.43 by the mid-day break, marking a substantial loss. This downturn was triggered by Trump’s announcement on Friday, where he warned of an additional 100 percent tariff on Chinese goods and threatened to cancel a summit with Chinese President Xi Jinping. The primary reason cited for this action was China’s export restrictions on rare earth minerals, which are crucial components in various products, including smartphones, electric vehicles, and military hardware.
The US-China trade tensions have been escalating, with both countries imposing tariffs on each other’s goods. Currently, Chinese products face US tariffs of 30 percent, while Beijing has retaliated with tariffs of 10 percent. Trump’s latest threat has exacerbated fears of a trade war between the two economic superpowers. The impact was not limited to Hong Kong, as other Asian markets also suffered losses. Shanghai’s Composite Index dropped 1.4 percent, and Sydney, Singapore, Seoul, Taipei, and Manila all experienced significant declines.
Despite the initial shock, Trump’s subsequent comments on Sunday provided some solace to investors. He expressed his respect for President Xi Jinping and stated that the US aims to help China, not harm it. This shift in tone led to a slight recovery in US futures, which soared over one percent. The price of gold, a safe-haven asset, continued to rise, reaching a new record of $4,060. Oil prices also bounced back after Friday’s decline, which was partly due to the Israel-Hamas peace deal that eased concerns about Middle East supplies.
Analysts believe that the threat of new tariffs may be short-lived, as both sides appear to be posturing ahead of their November 1 meeting, when the current tariff truce is set to expire. The US government shutdown is also seen as a factor that could dampen consumer sentiment in the US, making it less likely for Trump to re-escalate foreign policy issues without resolving domestic concerns first. As the situation continues to unfold, investors remain cautious, monitoring the developments in the US-China trade relations and their potential impact on the global economy.
Key market figures as of 0230 GMT included the Hang Seng Index down 2.2 percent at 25,705.25, the Shanghai Composite down 1.4 percent at 3,842.20, and the euro/dollar up at $1.1626. The pound/dollar was also up at $1.3361, while the dollar/yen rose to 151.88 yen. West Texas Intermediate crude oil was up 1.7 percent at $59.92 per barrel, and Brent North Sea Crude rose 1.6 percent to $63.74 per barrel. The New York Dow closed down 1.9 percent at 45,479.60, and the London FTSE 100 ended down 0.9 percent at 9,427.47.