Asian markets plummeted on Monday, with Shanghai’s Composite down over 6% and Hong Kong’s Hang Seng Index falling around 10%, as investors grapple with the impact of US President Donald Trump’s tariffs. The region is heavily reliant on exports to the US, with countries such as Vietnam and Bangladesh feeling the pinch.
Asian Markets Reeling from US Tariffs
Major indexes across Asia plummeted on Monday, with Shanghai’s Composite down over 6% and Hong Kong‘s Hang Seng Index falling around 10%. The decline was exacerbated as investors caught up with the big falls seen in other markets on Friday, which were closed for public holidays.
The impact of US President Donald Trump‘s tariffs is being felt across the region, with many countries heavily reliant on exports to the US. Vietnam and Bangladesh, in particular, have been hit hard, with a 46% tariff imposed on Vietnam and a 37% tariff on Bangladesh.
Tariffs Feed into Fears of Inflation and Recession
Analysts say that tariffs are feeding into expectations around inflation and a recession. ‘Julia Lee, Head of FTSE Russell, noted that ‘tariffs are feeding into expectations around inflation and a recession.” Goldman Sachs has raised its estimate of a US recession within the next 12 months to 45%, up from a previous estimate of 35%.
A recession is a period of economic decline, typically defined as a decline in gross domestic product (GDP) for two or more consecutive quarters.
It can be triggered by various factors, including monetary policy mistakes, global events, and supply chain disruptions.
During a recession, businesses may experience reduced sales, leading to layoffs and decreased consumer spending.
This can create a vicious cycle of economic contraction.
According to the National Bureau of Economic Research (NBER), the United States has experienced 11 recessions since World War II.
Other Wall Street firms have also revised their recession forecasts in response to Trump‘s tariff announcement. JPMorgan now sees a 60% chance of a US and global recession. A significant slowdown in the US economy would have major repercussions for Asian exports, which are heavily reliant on the US market.
Asia Bears the Brunt of US Tariff Hike
Countries from Vietnam to Bangladesh have become highly-reliant on the US as an export market. Trump‘s announcement last week included a 46% tariff on Vietnam and a 37% tariff on Bangladesh. Several major US brands, including Nike and Lululemon, produce goods in Vietnam.
Frank Lavin, a former Undersecretary for International Trade at the US Department of Commerce, noted that ‘Asia is likely to feel a disproportionate brunt of this turmoil because Asia sends more exports to the US than to other markets.’ The global stock market rout looks set to continue, with ‘Ms Lee‘ highlighting that ‘US futures trading lower point to another hard session on Wall Street tonight.’
The global economy refers to the economic activities and interactions among countries worldwide.
It is driven by international trade, foreign investment, and financial flows.
The global economy has grown significantly since World War II, with the establishment of institutions like the International Monetary Fund (IMF) and the World Trade Organization (WTO).
According to the IMF, the global GDP reached $88 trillion in 2020.
Key players in the global economy include the United States, China, Japan, Germany, and the United Kingdom.
Global Stock Markets Lose Trillions in Value
Since Trump announced sweeping new 10% import taxes on goods from every country, including key trading partners such as China, the European Union and Vietnam, global stock markets have lost trillions in value. Exchanges in Germany and France faced similar declines to those in the US and UK.
The decline in Asian markets is a further indication of the shockwaves emanating from Trump‘s tariffs. As investors continue to grapple with the implications of the tariff hike, it remains to be seen how long the market downturn will last.
