A wave of uncertainty washed over Asian financial markets on Thursday, as traders struggled to digest a startling declaration from US President Donald Trump: a trade deal with China was “done,” and it came with a hefty price tag.
The resulting cautious sentiment painted a mixed picture across the region’s bourses, with investors weighing the framework of the new agreement against a backdrop of shifting economic data.
The initial reaction was a flight from risk in key markets. In Tokyo, Japan’s benchmark Nikkei 225 slid 0.72%, while the broader Topix index fell 0.46%.
The pessimism extended to Hong Kong, where the Hang Seng index dropped 0.80%, and to mainland China, with the CSI 300 losing 0.23%.
Bucking the trend, however, were markets in South Korea, where the Kospi climbed 0.34%, and Australia, where the S&P/ASX 200 posted a modest gain of 0.25%.
Trump’s ‘done deal’ delivers 55% tariff shocker
The primary catalyst for the market’s unease was the nature of the trade deal itself.
In a post on his Truth Social platform, President Trump announced the agreement was “done, subject to final approval with President Xi and me.”
He detailed a framework where China would supply magnets and “any necessary rare earths,” and the US would permit Chinese students to attend its universities.
But it was the tariff details that sent a jolt through the markets. Trump stated, “WE ARE GETTING A TOTAL OF 55% TARIFFS, CHINA IS GETTING 10%.”
The figure was later confirmed by Commerce Secretary Howard Lutnick, who affirmed that tariffs on China will remain at that level.
This development overshadowed a report showing US consumer prices rose less than expected in May, a data point that would typically cheer investors.
The consumer price index climbed just 0.1% for the month, below the 0.2% forecast, with core inflation also coming in softer.
Despite this, US stock futures retreated, with S&P 500, Nasdaq 100, and Dow Jones Industrial Average futures all dipping around 0.2%.
The news failed to inspire confidence, as investors grappled with the implications. “That didn’t excite stock or bond investors,” Ed Yardeni, president of Yardeni Research, wrote in a note published Thursday.
“Perhaps, they were unsettled that Trump also said he is less confident that Iran will agree to stop uranium enrichment in a nuclear deal with Washington,” he added.
The sentiment was echoed by economists at ANZ, who noted in a report that “Equities pulled back as the market considered the reality of much higher tariffs being here to stay.”
Sensex, Nifty brace for lower start amid global jitters
The cautious mood is set to spill over into Indian markets, where benchmark indices Sensex and Nifty 50 are likely to see a negative start to Thursday’s session.
Trends on Gift Nifty, an early indicator of the Nifty 50’s direction, pointed to a lower opening, trading around the 25,171 level—a discount of nearly 40 points from the Nifty futures’ previous close.
This follows a day of choppy trading on Wednesday, where the domestic equity market ended with marginal gains.
The Sensex added 123.42 points, or 0.15%, to close at 82,515.14, after facing selling pressure near the 82,700 mark.
The Nifty 50 settled 37.15 points, or 0.15%, higher at 25,141.40, though it continued to encounter a significant hurdle around the 25,200 level.
Bank of Japan on sidelines as tariff fears outweigh inflation
Looking ahead, all eyes are turning to the Bank of Japan (BoJ), which is expected to keep its monetary policy unchanged when it meets next week.
The central bank faces a delicate balancing act, with rising domestic inflation clashing with fears of a global slowdown sparked by the very trade tensions rattling markets.
Japan’s core inflation hit 3.5% in April, its highest level since January 2023, driven largely by surging rice prices.
However, policymakers seem unconvinced that this inflation is sustainable.
“The Bank of Japan (BoJ) will keep its fireworks in the box when it meets next Monday and Tuesday,” Moody’s Analytics wrote in a note published Thursday.
The note cited weak economic data and the stalled trade talks as key deterrents to a policy shift.
“The central bank wants to see demand-driven inflation before tightening aggressively, but there’s preciously little evidence of that,” Moody’s said.
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