CHINESE stocks listed in Hong Kong will come under renewed pressure when they resume trading Bloomberg 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. On Saturday, Trump ordered general tariffs of 25 per cent on Canada and Mexico and 10 per cent on China, to come into effect on Tuesday, while promising a similar move later for the European Union. The Nasdaq Golden Dragon Index fell 3.5 per cent on 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 and Asia’s broader chip industry are more vulnerable than others. China on Sunday vowed countermeasures and said it would file a complaint with the World Trade Organization.
“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 Apr 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.
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Online retailers
Trump’s new trade levies include a broadside against e-commerce, 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 US from Canada and China, effectively applying tariffs more widely, though the scope of the measure was not immediately clear.
The decision appears to be primarily targeted at reducing duty-free shipments from China, which will hurt online retailers and e-commerce platforms such as Alibaba.
Goods such as clothing, accessories, home goods, electronics and small durable items from Shein and Temu alone account for 30 per cent 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.
Chips
Semiconductor makers with sales to China, including Taiwan Semiconductor Manufacturing Company and Samsung Electronics, will be in focus as Trump said he’d tax chips – repeating that vow after his meeting Friday with Nvidia chief executive officer Jensen Huang.
Meanwhile, shares of Chinese chipmakers such as Semiconductor Manufacturing International Corporation 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 US 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 Korea in a note dated Feb 1, citing broader risks from approaching tariffs and potential investigations into China.
“Taiwan and Korea are most exposed in terms of total revenue share from exports to the US. 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.
Mexico exposure, resources
Asian auto stocks with exposure to Mexico, such as Korea’s HL Mando and Kia will be on investors’ radar. Electric vehicle (EV) bellwether BYD, which is looking to build its first Mexican manufacturing plant, will also be in focus.
Mexico’s president on Sunday called for retaliatory tariffs and other non-tariff measures on the US, 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, aluminium, copper, oil and gas, and pharmaceuticals.
Green energy
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 EV usage.
Shares of Korean EV battery manufacturers such as Samsung SDI and LG Chem have dropped more than 25 per cent each since Trump’s election victory on Nov 5, compounded by already bleak sales forecasts.
The outlook is also grim for Chinese solar companies such as Longi Green Energy Technology, which have faced scrutiny from the US for years while dominating global markets with lower-priced products.
On Monday, the offshore yuan slid 0.5 per cent to trade around 7.36 per US dollar, close to a record low. BLOOMBERG
