Asian stocks drop as Trump’s tariff deadline nears

Stocks tumbled in Australia and Japan and equity-index futures for the S&P 500 fell more than 1.8%.

Asian shares slumped at the open as White House pushing ahead with sweeping tariffs on trading partners including a 104% levy on China sapped investor appetite for risk. US Treasury yields extended their gains.

Stocks tumbled in Australia and Japan and equity-index futures for the S&P 500 fell more than 1.8%. The dollar edged lower against major peers and oil extended its selloff. The offshore yuan rebounded after sinking to the lowest since it began trading in 2010. Yields on 10-year Treasuries extended this week’s strong gains.

The escalating trade war has spooked investors who remain concerned on whether the levies will push the world into an economic recession. Across world markets, investors have been gripped by concerns that something may break in the financial plumbing amid the cross-asset volatility. That has spurred speculation the Federal Reserve may need to speed up rate cuts to prevent a recession even with inflation jitters running rampant.

“The escalation of tariff battle between the US and China is shaking investors’ confidence globally,” said Tomo Kinoshita, Tokyo-based global market strategist at Invesco Asset Management. “Uncertainty over further retaliation by both sides is also creating dark clouds in investors’ mind.”

Wall Street was again lashed by wild swings on Tuesday amid back-and-forth trade threats between the US and China, with the S&P 500 closing down 1.6% — leaving it on the brink of a bear market. The US benchmark had earlier in the session rallied the most since 2022.

In early Asian moves, Treasury yield curve steepened with the two-year note outperforming longer-dated debt amid speculation Federal Reserve will cut rates amid escalating trade war. Japan’s stock indexes fell 2.6% and the New Zealand dollar fell below 55 US cents to the lowest since March 2020.

“The volatility reflects the new situation in which no one knows what the rules of road are, or even what the desired destination is,” said Que Nguyen at Research Affiliates LLC. “Until investors reset expectations or those rules and goals are better understood, markets will continue these wild swings between hope and fear.”

A White House official said the US is moving forward with levies on China as high as 104%, set to take effect after midnight New York time, as Premier Li Qiang said his country has ample policy tools to “fully offset” negative external shocks.

Tuesday’s slide extended the S&P 500’s drop since the president detailed worldwide levies last Wednesday to more than 12% and at one point pushed the gauge down 20% since its record close in February, though stocks bounced back at that level. It was also another day of nearly unprecedented volume on US equity markets, with more than 23 billion shares changing hands.

Trump is pushing ahead with higher duties on roughly 60 trading partners that he dubbed the “worst offenders.” He spent the final hours before his sweeping tariffs were set for full implementation lining up talks with key US allies, but hopes for a last-minute agreement with China appeared distant.

As foreign nations appeal to Washington for negotiations, Treasury Secretary Scott Bessent said there’s the potential for advantageous trade deals. Japan looks set to get priority in US tariff talks while Trump said prospects for a deal with South Korea were “looking good.”