Asia stocks sink, gold at record high as tariffs unnerve markets

Asian stocks slid on Friday with heavy selling in South Korea and Japan while safe-haven gold was perched at a record high as the latest tariff salvo from US President Donald Trump stoked investor worries of an all-out trade war.

Trump moved ahead with a 25 per cent tariff on auto imports due to kick in next week, drawing fierce criticism from politicians and industry executives across the globe and a warning from global car makers that price hikes were likely on the way.

The widening of the global trade war that Trump kicked off upon regaining the White House has jolted markets, with shares of global automakers hit particularly hard.

In Asia, Japan’s Nikkei fell nearly 2 per cent, led by sharp drops in Toyota and Honda, while South Korea’s benchmark index shed 2 per cent. The auto industry is a pillar of both countries’ economies.

European stock futures pointed lower, with automaker-heavy Germany’s DAX futures down 0.2 per cent. US futures were little changed.

“US tariffs on auto imports do not come as a huge surprise, having been flagged for some time,” said Fred Neumann, chief Asia economist at HSBC.

“To some extent, producers can shift supply chains and production locations to mitigate these effects. At the same time, they may also be able to pass some of the price increases to US consumers, given that tariffs affect nearly all producers.”

Some automakers, including Volvo Cars, Volkswagen’s Audi, Mercedes-Benz and Hyundai, have already said they will relocate portions of their production.

Ferrari, which makes all of its cars in Italy, said it would raise prices by up to 10 per cent on some models.

Hong Kong’s Hang Seng index fell 0.6 per cent as traders awaited clarity on Trump’s tariff plans for China. Trump said he would be willing to reduce tariffs on China to get a deal done with TikTok’s Chinese parent ByteDance to sell the popular app.

The focus is now on reciprocal tariffs the US is due to announce on April 2. Trump indicated the measures may not be the like-for-like levies he has been pledging to impose.

“Not surprisingly, the tariff talk is resulting in another round of risk-off as traders try to ascertain the implications, but generally conclude that tariffs will be both growth-restraining and inflation-producing,” said Thierry Wizman, global FX & rates strategist at Macquarie.

In the currency markets, the US dollar was steady ahead of inflation report later in the day. The US Personal Consumption Expenditures data, the Federal Reserve’s preferred gauge for prices, for February is expected to show a rebound in consumer outlays and annual core PCE prices heating up to 2.7 per cent.

The dollar is headed for a quarterly drop as worries about the impact of tariffs on US growth weigh. The euro eased to $1.07887, but was on course for a 4 per cent rise in the January-March period.

The yen was stronger at 150.675 per dollar, on course for a nearly 4 per cent gain against the greenback in the quarter as traders bet on the Bank of Japan hiking interest rates again.

Data on Friday showed core consumer inflation in Tokyo accelerated in March, remaining above the central bank’s target on steady gains in food costs. That kept alive market expectations of a near-term rate hike.

DBS strategists expect near-term consolidation for the yen, which they believe is caught between trade risks and firming inflation.

In commodities, gold prices scaled a record peak on Friday as the threat of trade wars drives a rush towards the safe-haven metal. Spot gold was last up 0.77 per cent at $3,079.5 per ounce.

Gold is up more than 17 per cent in the first quarter of the year, heading for its best quarterly performance since 1986.

“Continued haven demand, coupled with EM central bank buying in an effort to diversify FX reserves, make for a convincing bull case here,” said Michael Brown, senior research strategist at Pepperstone.

Oil prices eased a bit as traders assessed a tightening of crude supplies along with new US tariffs and their expected effect on the world’s economy.

Brent crude futures were 0.24 per cent lower at $73.85 a barrel. US West Texas Intermediate crude futures were 0.27% lower at $69.73.

Meanwhile China’s yuan hovered near a three-week low against the dollar on Friday and looked set for a second weekly loss, as concerns over worsening trade relations between the world’s two largest economies continued to dampen sentiment. Trade relations with the United States have been a primary focus for investors, as US President Donald Trump is set to impose new reciprocal tariffs on several trading partners starting April 2.