'Really scary': Catastrophe on markets due to Trump's tariffs is not over yet

The MSCI Asia Pacific Index fell by 7.9%, the biggest drop since October 2008. This happened after Trump spoke sharply about his tariff policy. The US president told reporters on Sunday evening to “forget markets for a second.”

“I don’t want anything to go down, but sometimes you have to take medicine to fix something,” Trump said.

Panic broke out in many Asian markets. A key indicator of Chinese stocks in Hong Kong fell by more than 9%. The yen rose sharply as investors sought safe havens, and Brent crude oil fell by more than 4%. Nasdaq futures fell by more than 4%.

After the markets opened after the weekend, Taiwan's stock index fell by 9.8%, the largest drop in its history. Futures on Japanese stocks were briefly suspended due to a circuit breaker, while Nintendo and Sony shares fell by more than 10%.

Investor concerns peaked when Trump made it clear that, unlike previous financial crises, the US government was not rushing to their aid, and China said it would impose retaliatory tariffs against the US.

As the market turmoil continued, some people close to Trump urged him to reconsider his plans before the April 9 deadline for retaliatory tariffs to take effect.

“I strongly believe launching tariffs on April 9th against the entire world — massively in excess of what we are being charged — is a mistake,” wrote billionaire Bill Ackman, founder of the Pershing Square hedge fund and a key Trump supporter. In his post, Eckman wrote that Trump is not “infallible” and called for a 90-day delay in the introduction of the tariffs.

“This is not what we voted for,” he wrote in a separate post.

Beijing's reaction

As hopes for a delay from Washington fade, markets and officials are watching Beijing's reaction. There is speculation that China may aggressively devalue the yuan after President Xi Jinping's government unveiled retaliatory duties of 34% on US goods last week.

“This is the most volatile market I’ve ever experienced since the Covid outbreak and we’re just at the start of Trump’s term,” said Ken Cheung, chief Asian currency strategist at Mizuho Bank in Hong Kong.

Fears of a recession

The massive sell-off has heightened fears of a global recession and increased expectations that the US Federal Reserve will try to react.

“We assign 50% odds to a recessionary outcome for the US economy,” TD strategists, including Oscar Munoz, wrote in a note on April 6. They added that they were moving their expectations for a Fed rate cut from July to June.

Treasury Secretary Scott Bessent said there is “no reason” to factor the recession into prices. Bessent called the market carnage a short-term reaction.

“We get these short-term market reactions from time to time,” Bessent said. “The market consistently underestimates Donald Trump.”

“Really scary”

Mingze Wu, a currency trader at StoneX, a financial services firm operating in the heart of Singapore's business district, said he has seen trading volumes drop and liquidity disappear.

“Investors are trying to read the tea leaves on Trump and all the retaliation risks, but they’re just impossible to read. People are really scared of what’s going on,” he said.

Stock market moves have shown that analysts have not yet factored the ongoing global trade war into their corporate earnings forecasts. Some strategists are now looking at down-market scenarios and drawing comparisons to the 1987 crash, which is remembered as Black Monday.

However, if any of this is prompting the Trump team to reconsider this week's deadline for tariffs, they have not signaled it.

“The tariffs are coming,” Commerce Secretary Howard Lighthizer said on April 6, adding that Trump ”announced it and he wasn’t kidding.”

On April 2, US President Donald Trump announced the introduction of new tariffs of 10% on imports from all countries (except Russia) and some high tariffs for Asian countries. This led to a collapse in financial markets and a drop in oil prices.