Asian stocks plunge, Nikkei drops 5% as US-China trade tensions escalate
(Investing.com) – Asian stocks were in the red on Friday as concerns over the US-China trade war continued to mount, wiping out hopes of a temporary tariff truce from the US. Japan’s Nikkei 225 index fell the most in the region, dropping 5%, marking one of its worst sessions of the year.
Escalating trade tensions weigh on investor sentiment
The plunge came after Wall Street fell sharply in the previous session, despite US President Donald Trump’s announcement that some tariffs would be delayed for 90 days. However, Washington’s continued imposition of higher tariffs has fueled tensions, drawing a harsh response and threats of retaliation from Beijing.
Neither side has shown any intention to resume trade negotiations in the short term, raising concerns among global investors about a prolonged confrontation that could negatively impact international supply chains and trade.
Japan hit hard, Nikkei and TOPIX plummet
The Nikkei 225 index fell 5%, while the TOPIX index also fell freely, under great pressure from export sectors such as automobiles, technology and industrial equipment - which are heavily dependent on the US and Chinese markets.
Although Japan is exempt from the 24% tariff from the US, the 10% general tariff and the 25% separate tariff on automobiles still cause the export industry to face "headwinds" in the short term.
According to a report from Citigroup, Japan is likely to avoid a recession this year thanks to strong domestic consumption, especially after a positive spring wage increase. However, the 2025 GDP outlook was cut, and expectations for a BOJ rate hike were pushed back to March 2026 from June 2025 as originally expected.
China eases on support from “national team”
Despite the escalating trade war, mainland Chinese markets posted modest declines thanks to intervention from state funds (known as “national teams”).
The CSI 300 Index fell 0.6%.
The Shanghai Composite lost just 0.2%.
Hong Kong’s Hang Seng fell 0.5%.
Beijing continued to signal support for the market, pledging to stimulate the economy and accelerate fiscal packages. This helped domestic industrial and consumer stocks hold up better than other markets in the region.
However, weak inflation data released earlier this week showed that China's economy still faces challenges, especially in the face of tariffs of up to 145% from the US, which officially took effect on Thursday.
In turn, China has imposed retaliatory tariffs of 84% on US goods, showing its determination and little room for concessions.
Broader Asian markets are down
Singapore's Straits Times Index fell 2.1%.
Australia's ASX 200 fell 1.3%.
South Korea's KOSPI lost 1.3%.
India's Nifty 50 futures pointed to a weak opening.
Overall, investor sentiment is highly bearish, as geopolitical and trade risks continue to overshadow the global growth outlook.
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