Asian markets faced another turbulent session on Wednesday as investors grappled with fears of escalating trade tensions under incoming U.S. President Donald Trump. A day after Trump pledged hefty tariffs on Canada, Mexico, and China, market sentiment was rattled across equities, currencies, and commodities. The fallout reflected broad uncertainty over how global trade could be reshaped.
Stock markets in Asia displayed a mixed performance, with most indices struggling to maintain positive momentum. Japan’s Nikkei 225 emerged as a notable underperformer, declining 0.9% amid sector-specific pressures on automakers. Shares in the auto sector fell by over 3%, as concerns grew about potential tariffs and the strengthening yen eating into profit margins.
Mainland Chinese blue chips dropped 0.4%, reflecting caution among investors over Trump’s trade plans targeting Beijing.
Hong Kong’s Hang Seng managed a slight recovery with a 0.1% gain.
South Korea’s KOSPI inched up 0.1%, showing limited rebound from Tuesday’s 0.6% loss.
Taiwan’s equity markets edged down by 0.2%.
The MSCI Asia-Pacific Index, a barometer for regional equity performance, slipped 0.1%, highlighting the broader weakness across the region.
Contrasting the pessimism in Asian markets, U.S. equities advanced overnight, with all three major Wall Street indices closing higher. Futures for the S&P 500 also pointed to a modest 0.1% gain, reinforcing the narrative of relative strength in U.S. markets compared to Asia.
Currency markets remained jittery as Trump’s tariff threats reverberated globally.
The Mexican peso and Canadian loonie, already weakened on Tuesday, continued their slide. The peso traded at 20.70 per dollar, approaching multi-year lows, while the loonie hovered at C$1.40695, not far from its recent nadir of C$1.4178.
The Chinese yuan in offshore trading edged lower to 7.2650 per dollar, approaching Tuesday’s four-month low of 7.2730. This decline underscores ongoing concerns about the impact of U.S. tariffs on China’s economic outlook.
Meanwhile, safe-haven currencies such as the Japanese yen extended gains, with the yen strengthening to a two-week high of 152.50 per dollar before easing slightly. The move reflected investors’ risk-off sentiment and the broader weakness of the U.S. dollar, which was also weighed down by falling Treasury yields.
The Australian dollar, often viewed as a proxy for the yuan due to China’s trade links with Australia, neared Tuesday’s four-month low at $0.6469. In contrast, the New Zealand dollar rebounded 0.4% to $0.5856 after the country’s central bank cut interest rates by 50 basis points—less aggressive than some traders had anticipated.
The catalyst for the market turbulence was Trump’s declaration on Tuesday that his administration would impose a 25% tariff on all goods from Mexico and Canada and an additional 10% levy on Chinese imports. These measures, he suggested, would remain until those countries took significant action to address U.S. concerns over illicit drug trafficking and immigration issues.
The reaction from market analysts was swift. Chris Weston, head of research at Pepperstone, remarked that Trump appears “far more prepared” compared to his first term, with a robust strategy to implement bold economic policies. However, Weston also noted that the increased unpredictability could fuel volatility in global markets.
Investors seem to be treating the announcement as a tactical maneuver ahead of a new administration, according to Shinji Ogawa of J.P. Morgan. The threat of tariffs has amplified “risk-off” sentiment, particularly ahead of the Thanksgiving holiday in the U.S., which typically sees thinner trading volumes.
The uncertainty also rippled through the bond market. U.S. short-term Treasury yields dipped further to 4.2458%, extending the decline from Friday’s nearly four-month peak of 4.3810%. Falling yields added to the bearish case for the dollar while reflecting investor preferences for safety amid trade policy uncertainty.
Safe-haven assets like gold and cryptocurrencies showed signs of resilience amid the turbulence. Gold edged up 0.2% to $2,637 per ounce, supported by investor demand to hedge against potential market volatility.
Bitcoin, the flagship cryptocurrency, attempted to rebound from a four-day slide, rising 1% to $92,630. However, the digital asset remained well below its record high of $99,830 reached earlier in the month.
In energy markets, oil prices extended losses as traders weighed the potential implications of a reported ceasefire agreement between Israel and Hezbollah. Brent crude futures dipped 8 cents to $72.73 a barrel, while West Texas Intermediate (WTI) crude futures fell 9 cents to $68.68. Market attention now turns to Sunday’s OPEC+ meeting, where production policies will be closely scrutinized.
Investors are bracing for more volatility as they digest the implications of Trump’s tariff threats and monitor critical economic data. The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures (PCE) deflator, is set to be released later Wednesday. This report could provide clues about the Fed’s next moves on interest rates, further shaping market sentiment.
In the meantime, the specter of protectionism looms large. With Trump signaling a more aggressive trade stance, global markets may face prolonged periods of uncertainty, particularly as the world’s major economies adjust to potential disruptions in supply chains and trade flows.
