Asian and European markets battled on Tuesday, April 8, to recover from the previous day’s tariff-fueled collapse, though Donald Trump’s warning of more measures against China and Beijing’s vow to “fight to the end” raised concerns of a spiraling trade war.
Equities across the world have been hammered since the US president unveiled sweeping levies against friend and foe, upending trading norms, sparking talk of a global recession and wiping trillions of company valuations.
Investors fought to claw back some of those losses as they tried to assess the possibility that Washington could temper some of the tariffs. Tokyo traded up more than 6% – recovering much of Monday’s drop – after Japanese Prime Minister Shigeru Ishiba held talks with Trump. However, the US leader’s threat to hit China with an extra 50% tariffs – in response to its 34% retaliation in kind – ramped up the chances of a catastrophic stand-off between the two economic superpowers.
Trump said he would impose the additional levies if Beijing did not heed his warning not to push back against his barrage of tariffs. China fired back that it would “never accept” such a move and called the potential escalation “a mistake on top of a mistake.”
If Washington “insists on a tariff war and a trade war, China will definitely fight to the end,” China’s Foreign Ministry spokesman Lin Jian said Tuesday. “Pressure, threats and blackmail are not the right way to deal with China.”
In light of the turmoil gripping markets, Trump told Americans to “be strong, courageous and patient.”
While uncertainty rules, investors in most markets took the opportunity to pick up some beaten-down stocks. Tokyo jumped 6%, with Nippon Steel rallying just as much after Trump launched a review of its proposed takeover of US Steel that was blocked by his predecessor, Joe Biden. Hong Kong gained more than 1% but was well short of recouping Monday’s loss of more than 13%, which was the biggest one-day retreat since 1997. Shanghai advanced 1.6% after China’s central bank promised to back major state-backed fund Central Huijin Investment in a bid to maintain “the smooth operation of the capital market.” Sydney and Mumbai added more than 2%, while Manila gained 3%. Seoul and Wellington also edged up. London, Paris and Frankfurt rose more than 1%, having dropped more than 4% Monday.
The advances followed a less painful day on Wall Street, where the S&P and Dow fell but pared earlier losses, while the Nasdaq edged up. Others, however, were not as fortunate. Taipei shed 4% to extend the previous day’s record loss of 9.7%, while Singapore was off more than 1%. Trading in Jakarta was briefly suspended soon after the open as it plunged more than 9% as investors returned from an extended holiday, while the stock exchange in Vietnam – which has been hit with 46% tariffs – shed more than 6%. Bangkok sank 5% as it also reopened after a holiday, with losses tempered by the Stock Exchange of Thailand’s decision to ban short-selling on most stocks.
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The trade war has also put the Federal Reserve in the spotlight as economists say it could send prices surging. Bank officials are now having to decide whether to cut interest rates to support the economy or keep them elevated to keep a lid on inflation.
