Asian markets responded predictably after President Trump decided to suspend tariffs that punished dozens of countries: Stocks soared among the countries that survived.
In Thursday’s trading, the benchmark index of Taiwan and Japan rose by more than 9% and increased by 6% in South Korea. The three Asian economies are among the U.S. trading partners, given Mr. Trump’s so-called reciprocity tariffs last 90 days.
Although U.S. allies will not immediately face tariffs of 24% to 32% that the Trump administration has previously threatened, they will still be subject to a lower 10% tax rate. This is a 25% tariff imposed by Mr. Trump on goods including cars, a special pain point for large auto exporters such as Japan and South Korea.
In the U.S., Mr. Trump’s reversal on Wednesday triggered the biggest one-day rally in the S&P 500 since October 2008, when stocks soared as investors expected the central bank to lower the central bank’s tax rates after the global financial crisis.
On Wednesday, Mr. Trump did not return more than 100% of new tariffs, which he has been to China since taking office in January.
Washington and Beijing have traded multiple rounds of tariffs, pushing each other’s trade costs to extraordinary levels. China upgraded its latest Salvo on Wednesday, raising its full U.S. import tax to 84%.
President Trump said on Wednesday that he does not think he needs to raise tariffs on China more than 125%, and he expects Chinese leader Xi Jinping to reach a deal. “I can’t imagine it. I don’t think we have to do more,” he said. “No, I can’t see it.”
In Thursday’s trading, Hong Kong-listed stocks rose about 2.5%, while Shanghai-listed stocks rose about 1%.
Takahide Kiuchi, executive economist at the Nomura Institute in Tokyo, said Mr. Trump’s latest move shows the shift from reducing the U.S. trade deficit to preparing for a trade war with China. He said that means “the risk has not been greatly reduced” for many countries, including Japan and South Korea, which view China and the United States as their highest trading partners.
The Chinese government has taken steps to stabilize its market. State-owned companies announced Tuesday that they will buy back some shares, a move that usually helps drive higher shares. On Thursday, an influential state media published a comment saying it was a good time for central banks to lower interest rates and take other measures to support the economy.
Over the past week, Mr. Trump’s wide trade area has sent markets to the tail and threatened to subvert global trade. Even after Wednesday’s rally, the S&P 500 index was below the peak in February. It’s also the worst presidency in the index since the Dot-Com Bubble broke out in early 2001.
In Asia, Japan’s stock benchmark fell by about 12%, and this year it exceeded 16% in Taiwan. South Korea’s KOSPI index remains roughly flat.
Berry Wang Contributed to research in Hong Kong.
