Asian equities plummeted as China’s response to Trump’s tariffs escalates the trade conflict.

Asian markets experienced significant declines on Monday, April 7, marking what traders referred to as a “black day” for equities, following China’s announcement of extensive new tariffs in retaliation against the United States. This escalation heightened concerns about a potential global recession, prompting investors to abandon riskier assets and resulting in the worst trading day in the region since the pandemic began. 

The widespread selloff affected all sectors, with Hong Kong suffering the most, plummeting by 10.7 percent, while Tokyo and Taipei saw declines of 6.2 percent and over 9 percent, respectively. 

Shanghai and Singapore also faced losses exceeding 6 and 8 percent, while Seoul’s drop of over 5 percent led to a temporary trading halt, the first in eight months. Major companies were not immune; tech giants like Alibaba and JD.com fell by 14 and 13 percent, respectively, and in Japan, SoftBank and Sony saw declines of over 10 and 9.6 percent. 

This turmoil followed Beijing’s announcement of a 34 percent tariff on all US goods effective April 10, a direct response to President Trump’s recent imposition of tariffs, which he characterized as necessary corrections to longstanding trade imbalances. Additionally, China implemented export controls on seven rare earth elements vital for high-tech industries, including gadolinium and yttrium. Means for a reconsideration of US policy were dashed when Trump reaffirmed his stance on Sunday, stating he would only engage in negotiations if trade deficits were addressed, denying any intention to instigate a market crash and suggesting that “sometimes you have to take medicine to fix something.”

The impact was felt across commodities, with both oil and copper prices plummeting. West Texas Intermediate crude dropped by 2.7 percent to $60.31 per barrel, while Brent crude fell to $63.84. Copper, often seen as an indicator of industrial demand, continued its decline amid concerns over a slowdown in global growth. 

Wall Street futures indicated another challenging day ahead, following a nearly 6 percent drop in major US indices on Friday. This downturn was exacerbated by Federal Reserve Chair Jerome Powell’s warning that tariffs would increase inflation and hinder growth, raising the specter of higher unemployment. 

Economists are raising concerns about the potential consequences, with Steve Cochrane, chief Asia-Pacific economist at Moody’s Analytics, cautioning that a recession in the US could occur swiftly and potentially last for a year, which would also impact China. 

Analysts suggest that the Federal Reserve is now in a precarious position, needing to support a weakening economy through rate cuts while simultaneously managing inflation caused by tariffs. Stephen Innes of SPI Asset Management remarked that Powell’s options are limited, as the Fed’s inflation mandate prevents it from providing a safety net while asset prices suffer. 

Tim Waterer, chief market analyst at KCM Trade, encapsulated the market’s unease, noting that traders are anxiously observing the escalating tariff conflict between the two largest economies, fearing that both could suffer significant damage from a prolonged economic struggle. 

With neither Washington nor Beijing willing to compromise, investors are increasingly shying away from risk assets, leading to a sharp decline in equities and shaking global confidence.

The key market indicators as of 0400 GMT show significant declines across various indices and commodities. The Nikkei 225 in Tokyo has fallen by 6.2%, settling at 31,699.95. In Hong Kong, the Hang Seng Index has dropped 10.7% to 20,405.96, while the Shanghai Composite is down 6.3% at 3,130.17. In the oil market, West Texas Intermediate is down 2.7%, priced at $60.31 per barrel, with Brent Crude also decreasing by 2.7% to $63.84 per barrel. Currency pairs reflect a downward trend as well, with the Dollar/Yen at 146.33, down from 146.98, and the Euro/Dollar at $1.0950, down from $1.0962. The Pound/Dollar has decreased to $1.2889 from $1.2893, and the Euro/Pound is down to 84.96 pence from 85.01. In New York, the Dow has closed down 5.5% at 38,314.86, while London’s FTSE 100 has seen a 5.0% decline, ending at 8,054.98.