Trump's "Tariff Storm" Deals a Heavy Blow to Asian Stock Markets! "Risk Aversion" Rapidly Sweeps the Globe

According to Zhitong Finance APP, the stock markets across the entire Asian emerging markets were completely swept into the global stock market sell-off wave on Friday. Following the latest tariff threats from U.S. President Trump, which triggered a plunge in risk assets, the stock markets in Thailand and Indonesia even fell directly into what is known as a "bear market" after the crash, with the Hang Seng TECH Index plummeting over 5%. Amid the recent continuous decline in global stock markets, especially U.S. stocks, investment portfolios leaning towards risk aversion have significantly outperformed those with a higher allocation to technology stocks, cryptocurrency stocks, and other high-risk preferences, highlighting the trend of "risk aversion" as funds tend to flow into safe-haven assets under the macro expectations that Trump's tariffs may trigger a new round of global trade wars, striving to avoid risks while seeking excess returns.

Statistics show that Thailand's benchmark stock index plummeted 2.4%, with a cumulative decline of over 20% from its October peak. The Indonesian stock market also fell over 20% into a bear market, with its central bank promising to intervene strongly in the market after the Indonesian rupiah hit a five-year low. Meanwhile, global funds are flocking into essential consumer goods, healthcare sectors, as well as the U.S. dollar and U.S. Treasury investment markets seeking refuge, aiming to avoid the risk of market crashes through safe-haven portfolios under the heavy impact of Trump's tariffs.

"The threat of Trump's tariffs has clearly become the market focus, and with the rebound of the U.S. dollar, the investment sentiment across the entire Asian region is extremely fragile," said Kok Hoong Wong, head of institutional equity sales trading at Maybank Securities Pte.

Asian stock markets and currencies are facing a dual blow: the uncertainty of Trump's trade policies and concerns over the cooling expectations of U.S. Federal Reserve rate cuts. Especially as Trump announced new tariffs on Canada, Mexico, and China, rather than conducting trade negotiations as previously expected by the market to push the U.S. government to halt the tariff increases, the global tariff clouds and weak global demand are severely impacting the export-oriented economies of Thailand and other Asian regions, while Indonesia, despite experiencing net bond inflows, is facing intensified capital outflows.

The latest turmoil stems from Trump's official announcement of new tariffs on China and plans to impose taxes on Mexico and Canada starting next week. The new tariffs on Chinese goods have escalated the trade war between the two major global economies, raising concerns about a new round of global trade wars. Economists have warned that the tariffs on China and those on Mexico and Canada could push the U.S. economy into recession, which is also the logic behind the financial market's increasing concerns about the U.S. economy falling into "recession" or "stagflation." Recent economic data and consumer inflation expectations indicate that inflation is resurfacing, and the decline in U.S. consumer confidence and services PMI has exceeded market expectations.

Trump recently stated that a 25% tariff on Canada and Mexico will take effect on March 4, while Chinese imports will face an additional 10% tariff. Economists generally believe that the tariffs could harm U.S. economic growth, exacerbate inflation, and potentially trigger recessions in Mexico and Canada China has vowed to take "all necessary measures" to respond to the actions of the United States.

In addition, as Trump failed to halt tariffs on global trade powers as the market had expected, concerns began to grow about the so-called global "reciprocal tariffs," and the U.S. government under Trump's leadership is likely to implement tariffs on steel, chips, and pharmaceuticals as previously planned.

"Unfortunately, Trump's push for tariffs on China, Canada, and Mexico, and the potential expansion of the tariff coverage will significantly increase inflationary pressures in the U.S., leading to prolonged high interest rates and a surge in the dollar," said Xin-Yao Ng, a fund manager at abrdn. "This puts pressure on fragile currency markets, including several ASEAN countries (especially Indonesia)."

Statistics show that the Bloomberg Dollar Spot Index has risen 0.7% this week, while the benchmark index measuring Asian currencies has recorded its worst week in over four months, highlighting the influx of funds into dollar assets driven by risk-averse sentiment.

As global trade tensions impact emerging markets, investors are massively withdrawing from emerging market stock markets, turning to dollars, U.S. Treasuries, and safe-haven assets such as healthcare and consumer staples in developed markets. Global funds have continued to sell off Thai stocks, making it the worst-performing stock market in Asia for 2025, with nearly $10 billion in capital outflow over two years. According to institutional statistics, foreign capital net sold $934 million in Indonesian market stocks in February, which may record five consecutive months of capital outflow.

The benchmark index of the South Korean stock market, the Kospi, fell more than 3% on Friday, while India's NSE Nifty 50 index recorded its largest decline in over two weeks. Year-to-date, emerging market stocks dominate the list of the worst-performing major stock benchmarks globally.

"The tariff outlook casts a shadow over Southeast Asian stock markets," noted Nirgunan Tiruchelvam, an analyst at Aletheia. "More importantly, the combination of strong dollar expectations under tariffs and trade war conditions, along with regional economic difficulties, is impacting assets in the region."

Trump's Tariff Measures Hit Global Stock Markets Hard, Safe-Haven Assets Rise

The global stock market sell-off wave has spread from North America to Asia and then to Europe, with the dollar continuing to strengthen and U.S. Treasury yields continuing to decline, creating a financial market risk-averse frenzy. Investors are shunning high-risk tech stocks, cryptocurrencies, and other risk assets, and even the recently strong-performing Chinese and European stock markets are not escaping the wave of selling under risk-averse sentiment.

During Friday's Asian trading session, the Bloomberg Dollar Spot Index continued to rise, and U.S. Treasury prices also continued to increase, extending the strong gains of short-term U.S. Treasuries from the previous trading day. The yield on the 10-year U.S. Treasury fell to around 4.23%, indicating that the price of 10-year U.S. Treasuries has surged recently under risk-averse sentiment, with the yield curve hitting a new low since December. In addition, traditional safe-haven sectors such as healthcare and consumer staples in the global stock market saw smaller declines, and even recorded slight gains in safe-haven sectors in developed markets like the U.S. stock market

Trump's insistence on imposing tariffs on China and Canada has triggered a global stock market shock: the S&P 500 index has erased all gains for 2025, Bitcoin has plummeted 25% below its historical high, European Stoxx 50 futures have dropped over 1%, and the benchmark stock indices in Asia have recorded their largest decline in nearly a month.

Tech stocks have been the hardest hit in this round of sell-off, with the Nasdaq 100 index, which focuses on the world's hottest tech stocks, falling sharply by 2.8% on Thursday, while Nvidia's stock price plummeted 8.5% after releasing its latest earnings report. Since February, Chinese tech stocks such as Alibaba, Xiaomi, and Tencent have led the global stock market, but even the Hang Seng TECH Index, which has been the strongest index globally in February, could not escape the sell-off on Friday, dropping more than 5%.

It is worth noting that traditional safe-haven asset gold has shown relatively weak performance recently, primarily because gold prices have skyrocketed since 2024, reaching new historical highs this year, and the current price is still hovering near its all-time high, causing safe-haven funds to refrain from chasing higher prices. Instead, they have flowed into two other traditional safe-haven assets— the US dollar and US Treasuries— which have underperformed gold and are at recent lows.

Jun Rong Yeap, a market strategist from IG Asia Pte, stated that these latest announcements "prompt market participants to reassess their expectations regarding Trump's tariff policy." "Whether this is still a negotiation strategy under extreme pressure or a clear action remains to be discussed, but the market is unwilling to take risks."

Billy Leung, an investment strategist from Global X ETFs, expressed that the additional 10% tariff on China is "frustrating because it keeps economic growth uncertainty alive, and the stock market hates uncertainty, increasing the risk of this becoming a pattern." "The market has been exhausted by the tariff negotiations, and now investors are forced to reassess."

In the US stock market, "risk aversion" suddenly prevails

On Thursday, the US stock market, with valuations near historical highs, experienced a "Black Thursday": the S&P 500 plummeted 1.6%, erasing all annual gains, and the Nasdaq 100 index fell 2.8%. AI leader Nvidia's earnings report fell short of expectations, causing its stock to drop 8.5% and triggering a sell-off in tech stocks.

The benchmark index measuring the "seven tech giants" in the US stock market— which includes Apple, Microsoft, Google, Tesla, Nvidia, Amazon, and Meta Platforms— has officially entered a correction zone. Goldman Sachs' compiled "non-profitable tech stock portfolio" is on the verge of breaking down and is about to give back all investment gains brought by the speculative frenzy after the election. The "Trump premium" (the frenzied increase following Trump's victory) for cryptocurrency concept stocks has completely evaporated, and a benchmark index measuring heavily shorted companies has fallen to October levels

The fundamentals of the U.S. economy are also under pessimistic expectations. The latest economic data shows that business activity, inflation expectations, consumer confidence, and unemployment claims are all weak. Bond traders are rushing to buy U.S. Treasury bonds, betting that the Federal Reserve will have to shift from combating inflation to addressing economic slowdown.

The "momentum trading" driven by animal spirits was completely reversed on Thursday, with the technology and communication services sectors, which led in 2023-2024, becoming the worst-performing sectors in 2025. In addition, traditional defensive sectors such as healthcare and consumer staples surged overnight. Coca-Cola Company rose on Thursday as the three major U.S. stock indices fell, while healthcare giants such as Johnson & Johnson, Novartis, AbbVie, and Bristol-Myers Squibb all achieved gains on Thursday.

JC O'Haraa, Chief Technical Strategist at Russell Investments, pointed out: "The bond market frenzy is interpreted as an economic warning, accelerating the withdrawal of funds from risk assets. When investors see a defensive rebound, they become more inclined towards defense rather than offense."

"The S&P 500 welcomes the decline in yields, but when the drop is so rapid and severe, the first reaction of investors is to ask what is wrong with the market," he added. "As the market interprets the rise in the bond market and the rise in the healthcare sector as a defensive move, it has also accelerated investors' withdrawal from high-risk trend-chasing trades."

Individual investors typically flock to momentum-driven speculative trades, but now they are pausing their frenzied buying. Data from JP Morgan shows that within two hours after the market opened on Monday, U.S. retail investors sold $1.1 billion worth of stocks, marking the largest outflow of funds in a two-hour period since the outbreak of the pandemic in March 2020.

According to the latest sentiment survey from the American Association of Individual Investors (AAII), overall, retail investor sentiment has become extremely pessimistic. The survey data shows that for the week ending Wednesday, the proportion of U.S. retail investors expecting stock prices to decline over the next six months surged by more than 20 percentage points to nearly 61%, compared to a historical average bearish ratio of only 31%. The gap of 41.2% leaning towards bearish sentiment is the highest since September 2022 (43.1%), with the previous higher pessimistic level being 51.4% in March 2009