(Sharecast News) - Markets across the Asia-Pacific region fell sharply on Thursday after the United States announced sweeping new tariffs on over 180 countries, intensifying trade tensions and rattling investor sentiment.
The move, a fulfilment of one of president Donald Trump's election promises made last year, included so-called "reciprocal tariffs" targeting countries accused of imposing disproportionate trade barriers and currency manipulation.
"Global financial markets experienced a sharp selloff as Trump's unexpectedly aggressive efforts to reshape the global economic landscape rattled investors," said TickMill market strategy partner Patrick Munnelly.
"Asian markets suffered losses, with Japan's benchmark index plummeting to an eight-month low.
"Yields on US 10-year Treasuries hit their lowest levels in over five months as investors flocked to safe-haven assets, driving up the Japanese yen."
Munnelly noted that gold prices meanwhile surged to record highs, adding that the tariff implications impacted all headline financial instruments, with equity futures experiencing sharp declines, Treasury yields falling, and the dollar weakening.
"The two-year US breakeven inflation rate rose by roughly 10 basis points to 3.4%, signalling that inflation concerns are partly driving market reactions.
"However, the predominant initial response appears to stem from apprehension regarding the broader economic outlook - major multinational corporations reliant on global supply chains, including Apple, Toyota, and Nike, are expected to continue to scale back operations amid rising uncertainty.
"Yields also fell across Japan, Australia, and New Zealand, while bond futures rose in Europe and Canada."
Markets turn red in response to Trump's swingeing tariffs
Japan's Nikkei 225 led the regional declines, slumping 2.77% to 34,735.93, while the broader Topix index lost 3.08%.
Major Japanese stocks were heavily sold off, with Sumitomo Dainippon Pharma plunging 10.15%, Konica Minolta down 8.91%, and Resona Holdings off 8.72%.
In China, the Shanghai Composite fell 0.24% to 3,342.01, while the Shenzhen Component dropped 1.4%.
Losses were concentrated among industrials and electronics, as shares of Anyuan Coal Industry Group, Sailun Jinyu Group, and Shenzhen Kinwong Electronic all hit the 10% daily limit down.
Hong Kong's Hang Seng Index shed 1.52% to close at 22,849.81.
Heavyweight exporters were among the worst performers, with Shenzhou International Group down 14.15%, Techtronic Industries losing 12.37%, and BYD Electronic off 8.73%.
South Korea's Kospi 100 dropped 1% to 2,509.61, pressured by steep losses in technology and leisure stocks.
Samsung Electro-Mechanics declined 8.5%, LG Innotek fell 6.44%, and Kangwon Land slid 5.94%.
Australia's S&P/ASX 200 fell 0.94% to 7,859.70, weighed down by broad losses in healthcare and mining.
Ansell plunged 14.34%, Mineral Resources lost 9.47%, and Netwealth Group fell 8.65%.
New Zealand bucked the regional trend, with the S&P/NZX 50 rising 0.15% to 12,338.57.
Gains were led by defensive and property-related stocks, including Vital Healthcare Property Trust, Synlait Milk, and Stride Property.
In currency markets, the dollar was last down 1.76% on the yen, trading at JPY 146.66, as its weakened 0.62% against the Aussie to AUD 1.5777, and retreated 0.86% from the Kiwi, changing hands at NZD 1.7249.
Oil prices were sharply weaker, with Brent crude futures last down 3.51% on ICE at $72.32 per barrel, and the NYMEX quote for West Texas Intermediate was off 3.72% at $69.04.
China braces for tariff impact, Japan bond yields slide
In economic news, China was bracing for a significant economic hit from the new US tariffs set to take effect next week, with analysts warning of a sharp drop in exports and slower GDP growth.
Starting 9 April, Chinese exports to the United States would face an effective tariff rate of 54%, prompting concerns about a potential 15% decline in outbound shipments and a drag of up to 2.5 percentage points on GDP growth, according to Macquarie Capital.
The firm's economists, Larry Hu and Yuxiao Zhang, noted the impact could be felt through multiple channels, including reduced US demand, a broader slowdown in global trade, and the disruption of export supply chains.
They said in a note that they expected China to respond with stimulus measures aimed at bolstering domestic demand, a potential reversal of regulatory tightening, and a mix of retaliatory tariffs and non-tariff actions.
China could also look to mitigate the fallout by expanding exports to other regions, such as the European Union and Southeast Asia.
India was also facing fallout from Washington's new trade policy, with a 26% blanket tariff on Indian imports, described by Macquarie analysts as "much worse than expected", posing risks to India's growth outlook.
With pharmaceuticals making up 14% of Indian exports to the US - and currently exempt - any policy shift could significantly impact India's $45.7bn trade surplus.
The firm said it saw downside risks to the Reserve Bank of India's GDP forecasts for the coming years.
"I've been banging the drum that markets were sleepwalking into tariff risk - but even I didn't expect Trump to drop the hammer like this," said SPI Asset Management managing partner Stephen Innes.
"The magnitude of the rollout - both in scale and speed - wasn't just aggressive; it was a full-throttle macro disruption.
"I was positioned for Asia FX pain, but this? This is policy shock with teeth."
In Japan, bond yields declined as investors sought safety amid growing trade and geopolitical tensions.
The 20-year Japanese government bond yield edged down to 2.121%, after briefly touching a one-month low of 2.085%.
Yields on the two- and five-year notes also fell to multi-week lows, reflecting a rise in demand for safe-haven assets following the tariff news.
Gold prices surged to a fresh record high, reaching $3,183.60 per ounce, as investors sought refuge from growing global uncertainty.
Reporting by Josh White for Sharecast.com.
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