Stocks savaged as China retaliation to Trump tariffs fans trade war
A man stands in front of an electronic board showing the Nikkei 225 index on the Tokyo Stock Exchange in Tokyo, on Apr 7, 2025. Japan's Nikkei share index plunged further on Apr 7, as US futures pointed to additional losses on Wall Street over President Donald Trump's punishing tariffs. (Photo: AFP/Kazuhiro Nogi)
HONG KONG: Asian and European equities plummented on a black Monday (Apr 7) for markets after China hammered the United States with its own hefty tariffs, ramping up a trade war many fear could spark a recession.
Trading floors were overcome by a wave of selling as investors fled to the hills, with Hong Kong's loss of 13 per cent its worst in nearly three decades, while Taipei dived 9.7 per cent and Tokyo almost 8 per cent.
Futures for Wall Street's markets were also taking another drubbing, while commodities slumped.
US President Donald Trump sparked a market meltdown last week when he unveiled sweeping tariffs against US trading partners for what he said was years of being ripped off and claimed that governments were lining up to cut deals with Washington.
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But after Asian markets closed on Friday, China said it would impose retaliatory levies of 34 per cent on all US goods from Apr 10.
Beijing also imposed export controls on seven rare earth elements, including gadolinium - commonly used in MRIs - and yttrium, utilised in consumer electronics.
On Sunday, vice commerce minister Ling Ji told representatives of US firms its tariffs "firmly protect the legitimate rights and interests of enterprises, including American companies".
Hopes that the US president would rethink his policy in light of the turmoil were dashed on Sunday when he said he would not make a deal with other countries unless trade deficits were solved.
"Sometimes you have to take medicine to fix something," he said of the ructions that have wiped trillions of dollars off company valuations.
NO SECTOR SPREAD
The savage selling in Asia was across the board, with no sector unharmed - tech firms, car makers, banks, casinos and energy firms all felt the pain as investors abandoned riskier assets.
Among the biggest losers, Chinese e-commerce titans Alibaba tanked more than 17 per cent and rival JD.com shed 14 per cent, while Japanese tech investment giant SoftBank dived more than 11 per cent and Sony gave up 9 per cent.
Hong Kong's 13 per cent loss marked its worst day since October 1997 during the Asian financial crisis.
Shanghai shed more than 7 per cent, with China's state-backed fund Central Huijin Investment vowing to help ensure "stable operations" of the market.
Singapore plunged nearly 8 per cent, while Seoul gave up more than 5 per cent, triggering a so-called sidecar mechanism - for the first time in eight months - that briefly halted some trading.
Sydney, Wellington, Manila and Mumbai were also deep in the red.
"We could see a recession happen very quickly in the US, and it could last through the year or so, it could be rather lengthy," said Steve Cochrane, chief Asia-Pacific economist at Moody's Analytics.
"If there's a recession in the US, of course, China will feel it as well because demand for its goods will be hit even harder," he added.
Concerns about demand saw oil prices sink more than 3 per cent at one point on Monday, having dropped around 7 per cent on Friday. Both main contracts are now sitting at their lowest levels since 2021.
Copper - a vital component for energy storage, electric vehicles, solar panels and wind turbines - also extended losses.
CARNAGE ON WALL STREET
The losses followed another day of carnage on Wall Street on Friday, where all three main indexes fell almost 6 per cent.
"Over Thursday and Friday, the S&P 500 fell by a massive 10.53 per cent in total, making it the fifth-worst two-day performance since World War Two," said analysts at Deutsche Bank.
"Indeed, the only other times we've seen a double-digit loss over two sessions were during COVID-19, the height of the (global financial crisis), and Black Monday 1987."
That showing came after Federal Reserve boss Jerome Powell said US tariffs will likely cause inflation to rise and growth to slow, and warned of an "elevated" risk of higher unemployment.
"Powell's hands are tied," said Stephen Innes at SPI Asset Management. "He's acknowledged the obvious- that tariffs are inflationary and recessionary- but he's not signalling a rescue."
While Powell has so far refused to announce any rate cuts, markets are betting he will do so soon.
