Asian markets slump as fears rise over Trump's economic policies

Asian stock markets saw losses continue on Wednesday, with investors increasingly concerned over the impact of Donald Trump’s economic policies on China and global trade. Since Trump’s re-election, the possibility of new trade tariffs, tax cuts, and deregulation in the U.S. has raised fears of a return to inflation, sparking a surge in the U.S. dollar as traders adjust their strategies.

The dollar has rallied strongly since last week’s election results, reflecting market expectations of higher U.S. inflation and reduced pressure on the Federal Reserve to cut interest rates. In particular, import tariffs on Chinese goods are expected to rise, with some economists forecasting a potential increase to as high as 40 percent. Such an escalation would mirror the severe tariffs seen during the initial U.S.-China trade war, adding to the apprehension across global markets.

Harry Murphy Cruise of Moody’s Analytics noted, "We expect the effective tariff rate on U.S. imports from China to rise to around 40 percent, doubling today’s rate. There may also be additional increases used as a negotiation tactic, which could lead to a reciprocating response from China."

This potential standoff comes at a challenging time for China, as it has recently implemented measures to boost its domestic economy. Yet, the absence of more significant stimulus announcements has disappointed traders, fueling further uncertainty about China’s economic prospects in the year ahead.

Asian markets reflected these concerns with notable declines in Hong Kong, Tokyo, Sydney, and Mumbai. Japan’s Nikkei 225 fell by 1.7 percent, while Hong Kong’s Hang Seng Index dipped slightly by 0.1 percent. In contrast, the Shanghai Composite Index managed to edge up 0.5 percent. European markets also opened with mixed results, with London’s FTSE 100 seeing a modest gain of 0.1 percent, while Paris and Frankfurt slipped slightly.

Traders are also monitoring bitcoin closely, as it approaches the $90,000 mark, spurred by Trump's favorable stance on cryptocurrencies. Bitcoin currently stands at $87,654, with expectations that it could soon break through the six-figure milestone.

The U.S. dollar extended its gains against major currencies, hitting a one-year high against the euro and climbing back above 155 yen. The greenback’s strength reflects reduced expectations for further Federal Reserve rate cuts, with traders now anticipating two cuts by June compared to four before the election. Investors await the latest U.S. consumer price data due later today, which could offer insight into the Fed’s future rate moves ahead of its December meeting.