Global Stock Markets Plunge Ahead of Trump's 'Reciprocal Tariff' Announcement

Asian Markets with High Trade Dependency, Such as South Korea, Japan, and Hong Kong, Plummet

Safe Assets Like Gold and US Treasuries Rise

Ahead of Trump's 'reciprocal tariff' war, global stock markets plummeted on the 31st (local time), and investors fled to safe assets like gold and treasuries. In particular, Asian markets, expected to be the main target of Trump's tariffs, crashed.

On the 31st (local time), stock prices in South Korea, Japan, and Hong Kong plummeted in the Asian market. Japan's Nikkei 225 index fell by 4.05%, hitting its lowest point in six months, while Hong Kong's Hang Seng index dropped by 1.3%. South Korea's KOSPI also plunged by 3%.

US stock index futures also showed weakness. The S&P 500 futures fell by 0.7%, and the Nasdaq futures plunged by 1.1%.

Europe's Stoxx 600 index also started with a 1.2% drop at 9:30 AM Greenwich Mean Time. Particularly, stocks in mining, banking, and automotive sectors, which are exposed to tariffs, fell the most.

As investors flocked to safe assets, international gold prices rose by 1% in the US market, reaching a record high of $3,115.97 per ounce. Gold prices have surged about 19% this year. Another safe asset, the yen, rose by 0.7% against the dollar to 148.73.

The yield on the US 10-year Treasury fell by 6 basis points (1bp=0.01%) to 4.19%, showing strength. Bond yields and prices move inversely. German and UK government bonds also rose, supported by safe asset preference.

According to Bloomberg and other foreign media, President Trump stated over the weekend that reciprocal tariffs would be implemented on "all countries," not excluding some countries like 15 or 10. Tariffs on steel, aluminum, and automobiles have already been confirmed.

Trump's reciprocal tariffs are not expected to only impact the GDP of trading partner countries. Economists believe that the trade war initiated by Trump could also slow down the US economy more than initially expected.

Bloomberg Economics estimated that depending on the scale of Trump's reciprocal tariffs, US GDP could decrease by 4% within 2-3 years, and inflation could rise by an additional 2.5%.

Goldman Sachs predicted that Trump's economic policies this year would lead to rising inflation and unemployment rates in the US, and the economy would enter a recession. Goldman economists revised the probability of a US recession from 20% last month to 35%. As the likelihood of a recession increases, the Federal Reserve is expected to cut rates three times this year, up from the previous forecast of two cuts.

Jefferies strategist Mohit Kumar pointed out that "the most negative scenario is that April 2 is just the starting point of negotiations, and they could be prolonged," indicating the possibility of prolonged tariff uncertainty.

Due to tariff-related fears, the S&P 500 recorded its worst quarter since 2022. About $5 trillion in value evaporated from the peak on February 19. As signs that tariffs are starting to impact the US economy become clear, US consumer sentiment is plummeting, and inflation expectations are soaring.

Guest Reporter Kim Jung-ah kja@hankyung.com