Asia stocks slide, Nikkei down 5% on US-China trade war fears

Investing.com-- Asian stocks slid on Friday with Japanese markets leading losses on heightened concerns over the fallout of a worsening U.S.-China trade war, which largely offset relief over the U.S. postponing some trade tariffs. 

Regional markets tumbled tracking an overnight slump on Wall Street, as a rebound rally, on President Donald Trump’s 90-day exemption on reciprocal tariffs, was largely wiped out by signs of worsening Sino-U.S. trade tensions.

Trump imposed even higher tariffs against China, drawing ire and threats of more retaliation from Beijing. Both Washington and Beijing showed little intent to immediately begin trade talks. 

Wall Street futures wiped out early gains and fell in Asian trade, with S&P 500 Futures down 0.8%. 

In Asia, Japanese stocks were by far the worst performers, given that the country holds large export exposure to both the U.S. and China. 

Mainland Chinese stocks fell relatively less than their peers, boosted by apparent buying by state-backed funds- China’s so-called national team. 

Nikkei leads losses as trade-heavy sectors slump 

Japan’s Nikkei 225 index slid as much as 5%, as did the broader TOPIX index.

Losses were aimed chiefly at sectors with big exposure to international trade, such as automobiles and technology, which face slowing demand in both the U.S. and China.

Japan took some relief from Trump postponing 24% tariffs against the country. But Citi analysts noted that Trump’s 10% universal tariffs, plus an additional 25% levy on automobiles, still presented near-term headwinds.

Citi slashed its 2025 gross domestic product outlook for Japan, and pushed forward expectations for the Bank of Japan’s next interest rate hike to March 2026 from June 2025.

Still, Citi said that Japan will avoid a recession this year on strength in personal consumption, following another round of bumper spring wage hikes. 

China stocks fall less than peers despite trade war escalation

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell 0.6% and 0.2%, respectively, while Hong Kong’s Hang Seng index lost 0.5%. 

Chinese state-owned funds were seen snapping up more local equities this week, helping brace markets against worsening trade relations with the U.S.

Beijing vowed more support for local markets, while also outlining plans to release more stimulus. Local media reports showed officials considering expediting planned stimulus measures in the face of a U.S. trade war. 

This notion drove some buying into domestically exposed Chinese stocks, especially in sectors such as industrials and consumer goods.

But weaker-than-expected Chinese inflation data released earlier this week indicated that Beijing had much more work to do to support the economy. Trump’s tariffs 145% tariffs- which took effect on Thursday- are expected to further complicate the government’s efforts. 

China’s 84% retaliatory tariffs against the U.S. took effect from Thursday, with Beijing showing little intent to deescalate. 

Broader Asian stocks were all negative, reversing course after a short-lived rebound in the prior session. Singapore’s Straits Times index shed 2.1%, while Australia’s ASX 200 fell 1.3%. 

South Korea’s KOSPI lost 1.3%, while futures for India’s Nifty 50 index pointed to a weak open.