HONG KONG: Asian stocks were mixed Monday (May 26) after Donald Trump thrust his trade war back into the spotlight by threatening the European Union with huge tariffs before extending a deadline for their implementation.
Just as markets were showing signs of settling following their bond-fuelled selloff last week, the US president hurled his latest grenade across the pond by levelling 50 levies at the bloc from Jun 1, saying talks were “going nowhere”.
He also said he would hit smartphone makers with 25 per cent tolls if they did not make their handsets in the United States.
Wall Street’s three main indexes and most European markets dumped into the red on Friday.
However, Asia got a reprieve after Trump said Sunday that he would delay the EU tariffs until Jul 9 following a “very nice call” with its boss Ursula von der Leyen, adding that officials will “rapidly get together and see if we can work something out”.
Tokyo, Shanghai and Seoul rose, but Hong Kong, Sydney, Singapore, Wellington, Taipei, Manila and Jakarta fell.
The dollar remained under pressure after dropping on Friday.
Analysts said the latest unexpected salvos from the White House highlighted the uncertain path investors are having to walk owing to the president’s volatile policy pivots.
They have also warned that his bill to extend tax cuts and slash spending could balloon the national deficit by trillions of dollars, putting upward pressure on Treasury yields and sparking warnings about the world’s biggest economy.
“The consensus view was always that the 50 per cent tariffs wouldn’t hold for long anyhow and would have most likely been reduced towards 20 per cent shortly after 1 June,” said Christ Weston at Pepperstone.
“But this action (Sunday) simply highlights that while tariffs will be helpful in keeping the US deficit in check, they are also a primary negotiation tool, where the initial gambit has been swiftly reduced.”
