Global stock markets fell on Tuesday after US President Donald Trump confirmed tariffs on Canada and Mexico would go into effect alongside an increase in duties on Chinese goods.
Mainland China’s CSI 300 benchmark dropped 0.4 per cent in morning trading, while Hong Kong’s Hang Seng index fell 0.7 per cent. Japan’s exporter-heavy Nikkei 225 slid 1.8 per cent, while Australia’s S&P/ASX 200 retreated 0.8 per cent.
Overnight on Wall Street, the S&P 500 closed almost 2 per cent lower and the Nasdaq Composite fell 2.6 per cent after Trump said 25 per cent tariffs on Canada and Mexico would go into effect on Tuesday.
The president also signed an executive order to apply additional levies of 20 per cent on Chinese imports from Tuesday, the White House confirmed.
“Trump . . . may have diminished the hope of a last-minute deal” to avert tariffs, said Jason Lui, head of Asia-Pacific equities and derivatives strategy at BNP Paribas. “The tariffs [on China] are smaller but faster than we expected.”
The dollar fell 0.3 per cent against a basket of currencies including the euro, yen and pound on Tuesday, after falling 0.8 per cent the day before.
The People’s Bank of China kept the trading midpoint for the renminbi steady at Rmb7.17 a dollar — roughly where it has been since the start of the year — suggesting China is seeking to defend its exchange rate.
“The uncertainty around tariffs and policy is certainly restraining the dollar,” said Mitul Kotecha, head of emerging markets macro and FX strategy at Barclays, who added that weak US economic data was leading to concerns about a slowdown in the world’s largest economy.
“I think the message generally is that risk assets are taking a bit of a beating,” he said.
Analysts noted that Chinese stocks remained relatively robust because of optimism over the country’s artificial intelligence capabilities after DeepSeek unveiled its budget AI model in January.
This week’s meeting of the National People’s Congress, China’s rubber-stamp parliament, is also expected to yield further policies to stimulate the domestic economy.
“It’s interesting that the tech bullishness we’ve seen over recent weeks has sustained Chinese equities,” said Kotecha.
Regional defence stocks have been another bright spot, rallying amid expectations that governments will have to boost military spending and shoulder more of the burden for their security as Trump signals a pullback in US commitments.
On Monday, Washington suspended military aid to Ukraine.
Japanese shipbuilder Mitsubishi Heavy Industries rose about 4 per cent on Tuesday, while South Korea’s Hanwha Aerospace shot up 15 per cent.
The Hang Seng China aerospace and defence index, comprising Chinese defence stocks, was up 1.9 per cent.
“The rising uncertainty in geopolitics suggests countries will have to build up their defence capabilities around the world”, said Lui.