Asia markets brace for renewed tariff fallout
Stock futures pointed to declines in Tokyo and Sydney, after Wall Street equities fell from all-time highs overnight and the US dollar climbed. US equity contracts dropped in early Asia trading.
Megacaps led losses in the US on July 7 as Tesla tumbled nearly 7 per cent after
Elon Musk announced he's formed a political party, raising concern about his company's outlook. Emerging markets got hit as Mr Trump warned he'd add extra tariffs on countries aligning with 'the Anti-American policies of Brics.'
Mr Trump released the first in a series of tariff warning letters, just two days before agreements are due on countries facing his April 2 so-called reciprocal levies. The
new rates include 25 per cent duties on goods from Japan, South Korea, and Malaysia; 32 per cent on Indonesia; 35 per cent on Bangladesh; 36 per cent on Thailand and Cambodia; and 40 per cent on Laos and Myanmar.
'There is likely to be considerable concern in Asia that 90 days of supposed negotiations have so far produced many US tariff rates similar to the April 2 shock,' said Sean Callow, a senior analyst at InTouch Capital Markets in Sydney. 'The US clearly only has bandwidth for negotiation with a handful of trading partners, with the rest seemingly blamed for failing to reach a deal.'
The yen slid over 1 per cent against the US dollar in New York trading overnight. Despite the market turmoil from Mr Trump's tariffs, Japanese shares had rebounded from April lows, reflecting optimism that Japan and others would strike US deals that avoid derailing growth.
White House Press Secretary Karoline Leavitt said there would be around a dozen countries that receive notifications about their tariffs on July 7 directly from the president. Additional letters will be sent in the coming days, she said.
'Investors should be alert to headline risk,' said Fawad Razaqzada at City Index and Forex.com. 'The scope for last-minute deals is high, but so too is the possibility of renewed trade tensions.'
Analysts said that one positive to be taken away from the latest trade developments was that the higher tariffs won't be in place during July as Mr Trump extended the deadline for the steeper levies to kick in until August. That means 'an indirect extension' of the original 90-day pause that would expire on July 9.
'The outcome could certainly have been more dire for the economic outlook had the additional window of relief not been included in the latest trade-war salvo,' they noted.
The European Union is not expecting to receive a letter setting tariff rates imminently, according to a person familiar with those discussions. The EU is seeking to conclude a preliminary deal this week that would allow it to lock in a 10 per cent tariff rate beyond an Aug 1 deadline as they negotiate a permanent agreement.
Meantime, US Treasury Secretary Scott Bessent told CNBC said he expected to meet with his Chinese counterpart in the coming weeks.
Indian officials familiar with the matter said the nation had made its best offer on trade and the fate of an interim deal now lies in the hands of Mr Trump. Negotiators conveyed to Washington the red lines they were unwilling to breach in finalising an agreement, including allowing the US to export genetically modified crops to India, and opening up India's dairy and automobile sectors to America.
In Rio de Janeiro, several leaders responded to Trump's tariff threats against the 10-member Brics group. Brazilian President Luiz Inacio Lula da Silva joined South Africa in blasting the US president.
In 2024, the list of Brics members expanded beyond the original group of Brazil, Russia, India, China and South Africa to include Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia and the United Arab Emirates.
The countries in the bloc - which was designed to boost the nations' international standing and challenge the US and western Europe - account for more than half of the world's population.
So far, the US economy is holding up under the threat of a spiralling global trade war. Hiring is healthy, and inflation has remained tame. But the Federal Reserve is wary about tariffs despite pressure from Mr Trump to lower rates, and wants to see how they feed through to output in the next few months. BLOOMBERG
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