Asian Stocks Decline as Trump Escalates Trade Rhetoric: Asian stocks declined after U.S. President Donald Trump escalated his trade rhetoric,
affirming that he would not delay the July 9 deadline to impose higher tariffs on trade partners.
Contents
Strength of the U.S. Labor Market
Market Performance
The regional stock index fell by 0.5%, while Japanese stocks dropped by 1% following Trump’s threats to raise tariffs
on Japan and its ongoing criticism of its refusal to import U.S. rice.
In currency markets, the dollar index stabilized after hitting its lowest level since 2022 in the previous session,
while gold edged down slightly following two days of gains.
Investors are closely watching whether Trump will extend the temporary tariff
suspension he imposed in April was to allow time for negotiations.
Although markets used to react sharply to trade-related news, stock indices are now trading near record highs,
suggesting investors no longer perceive such threats as significant risks.
This calmness fuels expectations that Trump, consistent with his usual pattern,
may back down at the last minute after his initial escalation.
U.S. Stocks Show More Optimism
Philip Wall, head of portfolio management at Reliant Global Advisors, said:
“While U.S. stocks appear overly optimistic, global markets tend to overreact negatively every time Trump raises his tone.”
He added: “It’s not surprising that Trump continues to threaten a deadlock on July 9 and the imposition
of massive tariffs as a negotiation tactic.
There’s also an element of political theatrics in his statements.”
Over the past few weeks, Trump has followed his usual strategy of threatening high tariffs and retreating,
which some analysts call “TACO,” meaning Trump Always Chickens Out.
Kevin Hassett, Trump’s chief economic advisor, previously indicated that trade agreements could be announced after the July 4 holiday.
Following the signing of the tax and spending bill passed by the U.S. Senate.
Neil Newman, chief strategist at Astris Advisory Japan,
said Trump’s recent tariff threats do not pose a serious risk to Japanese stocks.
“In my view, Trump seems to have little to complain about.
The U.S. cannot afford to ignore certain points on the negotiation table with Japan,
but we know Trump will push hard for more. It’s just political noise.”
Strength of the U.S. Labor Market
In a separate development, U.S. job openings reached their highest level since November,
driven largely by the leisure and hospitality sectors, alongside a decline in layoffs.
The Federal Reserve described labor market conditions as strong in recent weeks.
Fed Chair Jerome Powell reiterated that the central bank might
have cut interest rates further without Trump’s expanded use of tariffs.
However, he did not rule out additional easing measures in this month’s upcoming meeting.
The forthcoming June employment report, due Thursday,
is expected to show a slowdown in non-farm job growth and a potential rise in the unemployment rate.
Fiscal Policy Developments
The U.S. Senate passed Trump’s $3.3 trillion tax and spending bill, with Vice President J.D. Vance casting the vote.
House lawmakers are expected to return from recess this week to vote on the Senate’s version,
despite resistance from moderate Republicans and the party’s far-right wing.
Commodity Markets
Gold held on to commodity gains after rising 2% over the past two sessions,
while oil remained steady in Wednesday morning trading.
Asian Stocks Decline as Trump Escalates Trade Rhetoric