Stocks in Asia continued their downward spiral on Wednesday, following a sharp decline on Wall Street, as President Donald Trump prepared to implement 104% tariffs on Chinese imports. The escalating trade tensions sent oil prices to their lowest levels in four years and intensified fears of a global recession.
The U.S. dollar weakened against safer currencies, while the offshore yuan hit a record low of 7.4287 per dollar. Futures for U.S. interest rates soared, suggesting around 115 basis points of rate cuts this year, up from 92 basis points on Tuesday.
On Wednesday, Washington confirmed that the 104% tariffs on Chinese goods would take effect after midnight. The news sparked significant volatility in the markets, with sharp fluctuations in both stocks and currencies.
The S&P 500 experienced one of its largest reversals in recent history, falling 4.2 percentage points after a strong start, ultimately wiping out $5.8 trillion in stock market value. This marked the deepest four-day loss for the index since its inception in the 1950s.
In early Asian trading, S&P 500 futures dropped 1.5%, while Nasdaq futures slid 1.7%. The sell-off spread to Europe, with EUROSTOXX 50 futures down 4.5% and FTSE futures losing 2.5%.
In Asia, China’s blue-chip stocks fell by 1.2%, while Hong Kong’s Hang Seng Index dropped 3.1%. The MSCI index for Asia-Pacific shares outside Japan decreased by 1.7%.
President Trump accused China of manipulating its currency to offset the tariffs, although he still believed a deal could eventually be reached. According to Ting Lu, chief China economist at Nomura, both nations are engaged in an “expensive” and “unprecedented” standoff, with no clear resolution in sight.
On Wednesday, the onshore Chinese yuan fell to a new low for 2023, as the People’s Bank of China set its mid-point fixing at 7.2066 per dollar, the weakest level since September 2023. Analysts at JPMorgan warned that the tariffs could push the global economy into recession, describing the $400 billion tax hike from China tariffs as a significant burden on U.S. households and businesses.
Other Asian stock markets also suffered losses. Japan’s Nikkei index fell 3.5% after a brief rally, while Taiwanese stocks dropped 1.7%, despite the government activating a $15 billion stabilization fund.
In the U.S. Treasury market, bond yields rose as investors sold off safe-haven assets to cover losses in other markets. The 10-year yield increased by 5 basis points to 4.335%, marking a 34-basis-point rise over three days. Meanwhile, two-year yields fell by 6 basis points to 3.665%.
Currency markets saw a flight to safety, with the yen and Swiss franc gaining against the dollar. The greenback fell 0.6% to 145.36 yen and 0.5% to 0.8430 Swiss francs.
In commodity markets, oil prices plummeted over 4%, driven by concerns over weaker demand from China. Brent crude futures dropped 3.9% to $60.36 per barrel, while U.S. crude futures fell 4.4% to $56.96 per barrel.
Gold prices also struggled, declining by 0.2% to $2,039.76 per ounce, marking the lowest level in a month.
This latest wave of market volatility underscores the growing uncertainties surrounding the ongoing trade conflict between the U.S. and China, as global financial markets react to the escalating tensions.
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