Asian stock markets experienced significant declines on Tuesday as fears of a potential trade war impacting U.S. economic growth intensified. This anxiety led to a shift in investor sentiment towards safer assets, notably the Japanese yen. President Donald Trump’s remarks during a recent interview, where he referred to a “period of transition” but refrained from confirming whether tariffs would trigger a recession, aggravated worries among investors.
As a result, major stock indices in Asia faced heavy sell-offs, with Japan’s Nikkei and Taiwan’s stocks both reaching their lowest levels since September. Australia’s benchmark index closed 0.8% lower, having briefly touched a seven-month low earlier in the day. Even previously buoyant Chinese stocks fell; the blue-chip index decreased by 0.5%, and Hong Kong’s Hang Seng Index slid by 1%.
The sentiment in Asian markets mirrored the pessimistic mood on Wall Street, where the S&P 500 and Nasdaq posted their largest single-day drops of the year, losing 2.7% and 4.0%, respectively. This sell-off has erased approximately $4 trillion from the S&P 500’s peak just a month ago. As the trading day progressed, S&P and Nasdaq futures improved slightly, while European futures showed signs of stability.
Market analysts suggested that traders believe the administration might change its stance if stock values plunged. The current market environment indicates a serious approach to tariffs, raising concerns about a significant economic slowdown. On the bond front, yields on U.S. Treasury notes fell, reflecting expectations that weak economic performance would likely result in the Federal Reserve easing monetary policy.
Investors are closely watching upcoming inflation data, as higher-than-expected figures could alter this outlook. With safe-haven assets gaining traction, the Japanese yen briefly reached a five-month high against the dollar, while the Swiss franc also strengthened. Contrastingly, the dollar index hovered near a four-month low, highlighting growing concerns among investors regarding U.S. economic resilience in the face of aggressive trade policies.