Asia markets poised for turbulence as Trump’s trade war reloads

Asia markets

Brace for impact—Asian markets are staring down the barrel of a volatile open on Monday, as Wall Street’s Friday selloff sends shockwaves through global risk sentiment. With inflation jitters gripping U.S. markets, Treasury yields climbing, and President Trump ready to slap “reciprocal tariffs” on a swath of economies, investors are scrambling for their trade war helmets.

Trump’s latest move isn’t merely another trade skirmish; it’s an escalation of his “America First” trade doctrine where “no country is off-limits.” This high-stakes gamble could disrupt global supply chains. Markets have witnessed this scenario before—last-minute exemptions and backroom deals (see: Mexico and Canada tariffs)—but if Trump maintains his hardline stance this time, Asian economies will be the first to feel the impact.

The mood is already shaken, and this only adds fuel to the fire. Friday’s Wall Street meltdown caused the Dow, S&P 500, and Nasdaq to plunge by more than 1%, as traders hurried to reassess their Fed rate cut bets. The initial tremors are already reaching Asia, with Australian and Japanese stock futures deep in the red—a clear indication that Monday could be a full-scale risk-off event.

And here’s the kicker: this is just the beginning. With the White House set to roll out its tariff blueprint in April, expect a high-volatility, headline-driven market environment where every Trump tweet and tariff tease sends traders scrambling. Welcome to Trade War 2.0—this one could get messy.

As we warned in our “Weekender” publication, we’re now officially in an extended period of heightened weekend risk—and right on cue, President Donald Trump just set the stage for yet another market shake-up.

On board Air Force One, Trump told reporters that a 25% tariff on all steel and aluminum imports is coming Monday. No carve-outs, no country exemptions—just across-the-board duties set to hit global metal markets like a freight train.

The immediate question: how much of this was already baked in? Investors have been on edge about tariffs, but a blanket 25% hit—especially without exemptions—wasn’t precisely the base case.

Trump didn’t specify the implementation timeline, leaving the market with a crucial unknown. Will this be an immediate move, or is there room for negotiations? Either way, the message is clear: Trump’s trade war is shifting into high gear, and for global markets, that means even more weekend headline risk ahead. Stay hedged.

The macro

The inflation dragon is once again rattling the macro landscape. A surprise drop in the U.S. unemployment rate, hotter-than-expected wage growth, and a sharp jump in consumer inflation expectations have forced traders to rethink their Fed playbook. The swaps market? It’s now pricing in just ONE Fed rate cut this year—pushed all the way back to October.

And if that wasn’t enough to rattle risk appetite, Trump’s tariff bombshell hit the tape like a lead balloon on Friday, fueling fresh uncertainty across global markets. The knee-jerk ‘risk-off’ reaction wasn’t just about trade—investors are waking this morning again to the reality that inflationary pressures aren’t going away, and the Fed might not cut rates at all in 2025.

Suddenly, the narrative has flipped—instead of a smooth, soft landing glide path, we’re back to inflation fears, but fortunately, rate hike déjà vu is not creeping into the investor psyche. But certainly, the idea of higher-for-longer rates is now back in the driver’s seat, nipping at the heels of markets already skittish about trade war 2.0.

The view

Mega-cap tech has been walking a tightrope, priced for perfection and running on fumes of optimism—but all it takes is one tariff bombshell to send it tumbling. If Trump’s trade war rhetoric morphs into action, we’re looking at a perfect storm of rising bond yields, a weakening macro landscape, and a stampede out of tech and U.S. equities.

History doesn’t repeat, but it sure rhymes. Late 2018 was a painful lesson—when trade tensions with China and an aggressive Fed path torpedoed markets, the S&P 500 logged its worst annual decline since the financial crisis. Back then, Cboe’s three-month implied correlation index spiked, signalling that individual stock fundamentals had been tossed overboard in favour of pure macro panic.

Flash forward to today? That same correlation index is scraping record lows, meaning stocks are still trading on their own merits. Typically, that’s a sign of market health. But here’s the problem: low correlation emboldens investors to take bigger risks. If the market abruptly pivots—whether due to tariffs, inflation shocks, or a geopolitical curveball—the unwinding of risk-heavy trades could be savage.

And this brings us to the biggest wild card of them all—Trump’s tariff playbook.

• Will tariffs be a negotiation tool or an all-out economic sledgehammer?
• Will the U.S. go after allies like the EU and Japan, or keep the firepower on China?
• How deep will the macro damage go, and at what point does the Fed step in?

Investors aren’t ignoring the risk—the uncertainty just paralyzes them. The waiting game is in full effect, with many reluctant to take big positions until Trump shows his hand.

With April 1 tariff deadlines looming, a fresh wave of U.S.-China trade friction, and rising inflation expectations, markets are heading into a volatility vortex.

The macro chessboard is shifting in real-time, and the stakes? Nothing short of a total market regime change.