HONG KONG: Chinese stocks listed in Hong Kong will come under renewed pressure when they resume trading today following a three-session break, after US President Donald Trump fired the first salvo of his tariff war.
Fears of rising levies had already helped push the MSCI China Index into a bear market last month. Last Saturday, Trump ordered general tariffs of 25% on Canada and Mexico and 10% on China, to come into effect tomorrow, while promising a similar move later for the European Union.
The Nasdaq Golden Dragon Index fell 3.5% last Friday, marking its worst day in seven weeks.
The new tariffs might curtail China’s products exports, dragging on the country’s already struggling economy.
Online merchants such as Alibaba Group Holding Ltd and Asia’s broader chip industry are more vulnerable than others. China yesterday vowed counter-measures and said it would file a complaint with the World Trade Organisation.
“China’s nascent recovery signs could be disrupted,” said Charu Chanana, chief investment strategist at Saxo Markets. The government “will have to strike a balance between responding to domestic and external headwinds,” she added.
Trump’s actions potentially mark the beginning of a series of threatened trade attacks, though he has so far scaled back his planned actions against China.
An executive order he signed on his first day in office, calling for a series of trade review reports by April 1, could lead to further action. Other Asian economies also may be vulnerable as they account for a significant portion of the increase in US imports in recent years.
An exodus of foreign investors from the region’s equities since Trump’s election win, could accelerate.
Here are the stocks and sectors likely to react the most to prolonged trade wars and tariffs.
Trump’s new trade levies include a broadside against eCommerce, with apparent plans to extinguish a long-held tariff exemption for packages worth less than US$800.
He curtailed so-called de-minimis exemptions for small parcels and packages sent to the United States from Canada and China, effectively applying tariffs more widely, though the scope of the measure wasn’t immediately clear.
The decision appears to be primarily targeted at reducing duty-free shipments from China, which will hurt online retailers and eCommerce platforms like Alibaba.
Goods such as clothing, accessories, home goods, electronics and small durable items from Shein and Temu alone account for 30% of all so-called de-minimis shipments, according to research from Pablo Fajgelbaum at University of California, Los Angeles and Amit Khandelwal at Yale University.
Semiconductor makers with sales to China, including Taiwan Semiconductor Manufacturing Co and Samsung Electronics Co, will be in focus as Trump said he’d tax chips – repeating that vow after his meeting last Friday with Nvidia Corp chief executive officer Jensen Huang.
Meanwhile, shares of Chinese chipmakers such as Semiconductor Manufacturing International Corp may rise, if tariffs are seen fanning the nation’s quest for industrial self-sufficiency.
Chips have been at the centre of the ongoing tech rivalry between the United States and China, with Washington implementing tighter export controls aimed at limiting the flow of advanced components to China. In response, Beijing has enacted its own restrictions.
This back-and-forth is likely to escalate given that Chinese startup DeepSeek’s low-cost artificial intelligence model is being seen by many as a threat to US dominance in the technology.
Morgan Stanley strategists including Daniel Blake reiterated caution on semiconductors, hardware, China, Taiwan and South Korea in a note dated Feb 1, citing broader risks from approaching tariffs and potential investigations into China.
“Taiwan and South Korea are most exposed in terms of total revenue share from exports to the United States. While they are not facing the first phase of tariff announcements, we note the momentum towards both a universal tariff and tariffs on essential goods, including semiconductors,” they said.
Asian auto stocks with exposure to Mexico, such as South Korea’s HL Mando Co and Kia Corp will be on investors’ radar. Electric vehicle bellwether BYD Co, which is looking to build its first Mexican manufacturing plant, will also be in focus.
Mexico’s president yesterday called for retaliatory tariffs and other non-tariff measures on the United States, while opening the door for the two sides to cooperate on security and public health issues.
Among other themes at risk, Trump has also threatened to impose tariffs on a wide range of imports in the coming months, including on steel, aluminum, copper, oil and gas, and pharmaceuticals.
Stocks associated with green energy remain vulnerable as Trump has prioritised the production of fossil fuels, reduced the focus on environmental issues, and threatened to review a consumer tax credit designed to encourage electric vehicle usage.
Shares of South Korean electric-vehicle battery manufacturers like Samsung SDI Co and LG Chem Ltd have dropped more than 25% each since Trump’s election victory on Nov 5, compounded by already bleak sales forecasts. — Bloomberg
