Asian stocks rise led by Japan on auto tariff reprieve

Financial markets are having an upbeat start to the week following a period of turmoil

Asian shares gained, led by Japan, as President Donald Trump floated a potential pause in auto tariffs, providing further relief to the market after suspending levies on some consumer electronics.

Indexes in Japan rose more than 1% with companies such as Toyota Motor Corp. and Honda Motor Co. jumping. Futures contracts for the S&P 500 pared earlier losses. Shares in China and Hong Kong fluctuated at the open. Treasuries climbed, and a gauge of the dollar edged higher to trim some of its decline on Monday.

Financial markets are having an upbeat start to the week following a period of turmoil. Temporary tariff exemptions on some sectors suggested by Trump have raised hope there may be room for negotiation, even as the frequent policy flip-flops keep investors on edge. Business leaders including JPMorgan Chase & Co.’s Jamie Dimon have warned that Trump’s effort to remake the global trading order may push the US into a recession.

“Trump has begun to show some flexibility on tariffs, and Japanese stocks may have hit a bottom last week,” said Hideyuki Ishiguro, chief strategist at Nomura Asset Management Co.

While Trump’s comments on a temporary exemption for imported vehicles and parts have brought relief to the automotive industry, they also inject further unpredictability into his tariff plans. Levies on auto imports have threatened to raise prices for American consumers and wreak havoc on auto supply chains.

The US also pressed forward with plans to impose tariffs on semiconductor and pharmaceutical imports by initiating trade probes led by the Commerce Department. The moves are a precursor to imposing tariffs and threaten to broaden the president’s sweeping trade war.

“There is probably still a lot of damage being done to the real economy and there remains a confidence crisis in the markets, meaning further downside and volatility in risk assets is probable,” wrote Kyle Rodda, a senior market analyst at Capital.com.

Meanwhile, Treasury Secretary Scott Bessent played down the recent selloff in the bond market, rejecting speculation that foreign nations were dumping their holdings of US Treasuries, while flagging that his department has tools to address dislocation if needed.

“I don’t think there’s a dumping” by foreign investors, Bessent said in an interview Monday with Bloomberg Television. He pointed to what he said was increased foreign demand at auctions for 10-year and 30-year Treasury securities last week.

Bessent rejected concerns about the simultaneous decline in Treasuries and the dollar last week signifying that the US was losing its haven status. On Monday, the dollar weakened to a fresh low for the year.

“We are still a global reserve currency” and there is still a “strong dollar policy,” Bessent said.

Markets Live Strategist Garfield Reynold says:

The US currency’s role as the bedrock of the global financial system is being undermined by President Donald Trump’s trade war. The damage done to the dollar’s status as a haven is so severe that the currency is likely to embark on a sustained decline.
The biggest Wall Street firms have highlighted how difficult it has been to predict the trajectory for equities. Barclays Plc’s Venu Krishna said the recent volatility leaves little confidence in any pricing now, while JPMorgan Chase & Co.’s Dubravko Lakos-Bujas indicated that forecasting in the current environment is a challenge and leaves a wide range of outcomes.

Strategists at BlackRock Inc.’s research arm said they are dialing up their risk-taking and embracing US and Japanese stocks following the pause of tariffs on many global trading partners, even as they steer clear of longer-dated US debt.

“The near-term risk of a financial accident has eased,” wrote the BlackRock Investment Institute strategists including Jean Boivin and Wei Li. “Checks on policy allowed us to extend our tactical horizon back to six to 12 months and resume our positive view on US and Japanese stocks.”

Eyes will also be on Chinese President Xi Jinping’s first overseas trip of the year, after he landed in Vietnam on Monday, with visits to Malaysia and Cambodia also scheduled. He’s expected to present his nation as a more stable partner than the US under Trump.

Meanwhile, Federal Reserve Governor Christopher Waller laid out two scenarios for how Trump’s trade policy could affect the US economy, but said the inflationary impact of either would likely be temporary.

Waller called the new tariff policy “one of the biggest shocks to affect the US economy in many decades,” in remarks prepared for an event in St. Louis on Monday. Should there be a small tariff effect on inflation, rate cuts would “very much” be on the table for the latter half of 2025, he said.