US stocks drop, Asian markets sink amid uncertainty over Trump’s tariffs

The Dow Jones Industrial Average dropped 320 points after giving up an earlier surge of 1,460, while the Nasdaq composite lost 2.1 per cent.

Uncertainty is still high about what President Donald Trump will do with his trade war. The latest tariffs, including a massive 104 per cent levy on Chinese imports, have kicked in after midnight.

The Indian market too saw a drop on Wednesday (April 9), with the Sensex declining over 400 points and Nifty below 22,400. Analysts predict market volatility to persist until there is more clarity on the US tariffs.

Also read: India growth story intact; PSU banks, telcos attractive: Market expert

Asian shares sink

Wednesday saw Asian shares sink again in response to the US decision to levy 10 per cent taxes on Chinese imports.

Japan's Nikkei 225 index initially lost nearly 4 per cent and markets in South Korea, New Zealand and Australia also declined.

The retreat overnight and into early Wednesday in Asia followed rallies for stocks globally earlier in the day, with indexes up 6 per cent in Tokyo, 2.5 per cent in Paris and 1.6 per cent in Shanghai.

Resolution vs recession

The Nikkei 225 in Tokyo fell more than 3.9 per cent before levelling off. About an hour after the market opened it was down 3.5 per cent at 31,847.40.

South Korea's Kospi lost 1 per cent to 2,315.27, while the S&P/ASX 200 in Australia declined 2 per cent to 7,359.30. Shares in New Zealand also fell.

Analysts have been warning to expect more swings up and down for financial markets given the uncertainty over how long Trump will keep the stiff tariffs on imports, which will raise prices for US shoppers and slow the economy. If they last a long time, economists and investors expect them to cause a recession. If Trump lowers them through negotiations relatively quickly, the worst-case scenario might be avoided.

Also read: Tariffs, visa tensions amidst weak demand trigger perfect storm for Indian IT stocks

Hope of negotiations

Hope still remains on Wall Street that negotiations may be possible, which helped drive the morning's rally. Trump said on Tuesday that a conversation with South Korea's acting president helped them reach the “confines and probability of a great DEAL for both countries.” On Tuesday, Japanese stocks led global markets higher after the country's prime minister, Shigeru Ishiba, appointed his trade negotiator for talks with the United States following a conversation with Trump.

China said it will “fight to the end” and warned of countermeasures after Trump threatened on Monday to raise his tariffs even further on the world's second-largest economy.

Also read: Black Monday bloodbath: Global markets crash amid fear of escalation in trade war

104 per cent tariff on China kicks in

White House press secretary Karoline Leavitt said Tuesday that Trump's threats of even higher tariffs on China will become reality after midnight, when imports from China will be taxed at a stunning 104 per cent rate.

That would coincide with Trump's latest set of broad tariffs, which are scheduled to kick in at 12:01 am. And Trump has made clear that he does not intend to have any exemptions or exclusions, according to the top U.S. trade negotiator, Jamieson Greer.

Also read: ‘Will fight to the end’: China spews rage after Trump’s 50 pc tariff hike threat

The US trade representative also said in testimony before a Senate committee that roughly 50 countries have already been in contact, and he's told them: “If you have a better idea to achieve reciprocity and to get our trade deficit down, we want to talk with you, we want to negotiate with you.” Trump's trade war is an attack on the globalisation that's shaped the world's economy and helped bring down prices for products on store shelves but also caused manufacturing jobs to leave for other countries. Trump has said he wants to narrow trade deficits, which measure how much more the United States imports from other countries than it sends to them as exports.

(With inputs from agencies)