Investors are bracing for a looming hit to US corporate profits and pressure on inflation after US President Donald Trump on Saturday signed an executive order imposing tariffs on its largest trading partners, with markets seen as not having fully factored in risks from higher levies on imports.
The US president’s executive order imposes a 25 percent tariff on goods entering the country from Mexico and Canada, and 10 percent on imports from China, with what the White House described as “tentative plans” for those to come into effect tomorrow.
Trump on Friday said nothing could be done by the three countries to forestall the tariffs, although he did raise the prospect of exempting oil from Canada. The tariffs include a 10 percent levy on all Canadian energy supplies imported by the US.
Photo: AFP
“I do think the markets are going to react to this,” Siebert Financial Corp chief investment officer Mark Malek said. “Until now the market has really been on Trump’s side, but that could change and the market could challenge him for the first time.”
Barclays PLC strategists previously estimated that the tariffs could create a 2.8 percent drag on S&P 500 company earnings, including the projected fallout from retaliatory measures from the targeted countries.
The executive order includes a provision for Trump to increase the size and scope of the tariffs if countries affected seek to retaliate.
Chinese stocks listed in Hong Kong would also come under renewed pressure when they resume trading today following a three-session break, after fears of rising levies had already helped push the MSCI China Index into a bear market last month. The NASDAQ Golden Dragon Index fell 3.5 percent on Friday, its worst day in seven weeks.
Goldman Sachs Group Inc economists have estimated that across-the-board tariffs on Canada and Mexico would imply a 0.7 percent increase in core inflation and a 0.4 percent hit to GDP.
The potential to drive up consumer prices is a particularly sensitive area for investors, who are worried about a revival in inflation causing the US Federal Reserve to stop cutting interest rates. The US central bank last week paused its rate-cutting cycle, while Fed Chair Jerome Powell said officials were “waiting to see what policies are enacted” with the new president.
The new tariffs might curtail China’s products exports, dragging on the country’s already struggling economy. Online merchants such as Alibaba Group Holding Ltd (阿里巴巴) and Asia’s broader chip industry are more vulnerable than others.
“China’s nascent recovery signs could be disrupted,” Saxo Markets chief investment strategist Charu Chanana said.
The Chinese government “will have to strike a balance between responding to domestic and external headwinds,” she added.
Other Asian economies might also be vulnerable, as they account for a significant portion of the increase in US imports in recent years. An exodus of foreign investors from the region’s equities since Trump’s election win could accelerate.
Investors widely expect some kind of selloff in stocks and other higher-risk assets when markets reopen today.
Cetera Financial Group Inc chief investment officer Gene Goldman said the combination of high valuations, the impact of tariffs on inflation and the effects on Fed policy would contribute to declines.
With the S&P 500 near all-time highs, the index could move 3 percent to 5 percent in either direction in the short term, Evercore ISI Group strategists said in a note.
Semiconductor makers with sales to China, including Taiwan Semiconductor Manufacturing Co (台積電) and Samsung Electronics Co, would be in focus, as Trump said he would tax chips — repeating that vow after his meeting on Friday with Nvidia Corp CEO Jensen Huang (黃仁勳).
Morgan Stanley strategists, including Daniel Blake, reiterated caution on semiconductors, hardware, China, Taiwan and South Korea in a note on Saturday, citing broader risks from approaching tariffs and potential investigations into China.
“Taiwan and Korea are most exposed in terms of total revenue share from exports to the US. While they are not facing the first phase of tariff announcements, we note the momentum towards both a universal tariff and tariffs on essential goods, including semiconductors,” they said.
Additional reporting by Bloomberg
After several years flying high as Asia’s best Nvidia Corp proxy, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is increasingly vying with other artificial intelligence (AI) stocks for investor attention. Stock traders are chasing a wider array of beneficiaries as mainstream usage of AI creates demand for hardware beyond the most-advanced chips TSMC makes for Nvidia. Subthemes from the deepening memory crunch to advances in robotics are also luring bids. At the same time, investment caps on single stocks are pushing funds to diversify, while retail investors long familiar with TSMC through its US depositary receipts are being offered a broader set of
UNDER MICROSCOPE: Taiwan detained three people who allegedly conspired to buy servers in Taiwan and export them using fraudulent documentation, prosecutors said Nvidia Corp chief executive officer Jensen Huang (黃仁勳) on Saturday urged Super Micro Computer Inc to tighten up on compliance after Taiwan detained three people this week for allegedly making fraudulent declarations about artificial intelligence (AI) servers made by its US partner. The development marked the nation’s first crackdown on semiconductor smuggling, which grew after the US slapped restrictions on exports of high-end chips such as Nvidia AI accelerators to China. Nvidia is “rigorous” in explaining regulations to all of its partners, Huang told reporters after arriving in Taipei. “Ultimately Super Micro has to run their own company,” he said in response to
TECH RELIANCE: Growth is increasingly reflecting an unequal K-shaped distribution, where technology sectors outperform and other industries struggle, an expert said Standard Chartered Bank has significantly raised its forecast for Taiwan’s economic growth to 9.5 percent this year, up from 7.6 percent previously, citing surging artificial intelligence (AI) demand driving exports, semiconductor production and investment. The upgrade reflects a sustained AI supercycle that continues to fuel demand for advanced chips and technology infrastructure, which form the backbone of Taiwan’s exports, the bank said in a report this week. “We raise our 2026 growth forecast to reflect a much stronger-than-expected first-quarter GDP figure,” Standard Chartered senior economist for greater China and Asia Tommy Wu (胡東安) said in the report. Driven largely by a 35.3 percent
Two of Taiwan’s international carriers, Starlux Airlines Co (星宇航空) and EVA Airways Corp (長榮航空), have retained the five-star airline rating awarded by international airline review organization Skytrax. Starlux was awarded the distinction for a second consecutive year, while EVA Air received it for the 11th straight year, Skytrax said in statements released yesterday and on Thursday last week, respectively. The five-star rating is considered one of the airline industry's highest honors and is awarded following professional audits of airline product and frontline service standards, Skytrax said. The ratings are based on in-depth assessments using unified global quality standards rather than customer review scores
RSS