Asian economies bore the brunt of US President Donald Trump’s tariff deluge, with their currencies and stocks expected to come under selling pressure, according to strategists.
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(Bloomberg) — Asian economies bore the brunt of US President Donald Trump’s tariff deluge, with their currencies and stocks expected to come under selling pressure, according to strategists.
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The size of the tariffs was seen as more aggressive than expected, increasing the risk to growth in the region.
The Thai baht and Chinese yuan slumped around 0.7% in early trading, with the growth-sensitive Australian and New Zealand dollars down around 1%. Bonds in Australia and New Zealand surged as traders sought havens.
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Nick Twidale, chief analyst at AT Global Markets in Sydney:
“This was on the harder side of expectations. Japan and most of Asia took a hit — I think stocks will take a battering in Asia today, alongside most currencies, although the yen is a different story and may appreciate on its haven status.
Investors will look for value in domestic and defensive stocks, so they will probably suffer less, although I’m bearish on stocks overall.
There’ll be some big moves in some Asian currencies, as Vietnam etc. were hit hard, and liquidity will be an issue if they really start to move. Total tariffs on China are up to 54%, which is not good for global trade overall and will also weigh on Southeast Asian markets.”
Aroop Chatterjee, strategist in New York at Wells Fargo:
“It seems to me the numbers for Europe and Asia are much higher than expected.”
Currencies in the region will face selling pressure as “Asia always had the most to lose on this after Canada and Mexico.”
“This should increase weighted average tariffs significantly in the US, strengthen the US dollar, increase global growth risks and fuel inflation concerns.”
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Brad Bechtel, head of foreign exchange at Jefferies Financial Group Inc. in New York:
The tariffs are “definitely a risk-negative at the margin given the magnitude. It will also be inflation-positive for the US unless we see a significant US dollar rally.”
“In currencies the market has only been punishing the US dollar on US tariffs, but if these remain in effect for more than just a few weeks, then we will see economies around the world start to feel the pinch, resulting in lower growth for them, and more proactive central bank easing. Many of these nations still have inflation issues, so this seems to me to be very inflationary globally.”
Marito Ueda, head of the market research department at SBI Liquidity Market:
Since Japan has a large trade deficit with the U.S. in automobiles, Japan will have a difficult time negotiating with the U.S. Therefore, the yen is being bought.
With long-term interest rates in the U.S. declining on risk-off, Japanese stocks are expected to fall sharply today, and the yen is also expected to strengthen to the low 148-yen per dollar level.
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Brendan McKenna, emerging markets economist and currency strategist at Wells Fargo in New York:
“Southeast Asia was the target for sure.”
“It will be interesting to see how the People’s Bank of China responds. I doubt they allow for outsized depreciation, but would expect pressure for a weaker currency starts to build”
“I see a landing zone of around 7.35 for the offshore Chinese yuan. Retaliation from China could contribute to more depreciation, but I would expect the PBOC to push back as much as they can.”
—With assistance from Saburo Funabiki, Michael G. Wilson, Alice French, Carmeli Argana, Momoka Yokoyama and Masahiro Hidaka.
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