Asia markets wary as investors brace for barrage of executive orders from Trump 2.0

DONALD Trump is raring to go, and he has got the world watching and wondering which way to turn.

In Asia, investors adopted a cautious stance on Monday (Jan 20), ahead of the inauguration of Trump as US president, after markets closed in the region.

China and Hong Kong stocks climbed as Trump’s call with Chinese President Xi Jinping on Friday helped to ease some worries over simmering Sino-US tensions.

China’s blue-chip CSI 300 Index rose 0.5 per cent, adding to the 2.1 per cent gain seen last week, while Hong Kong’s benchmark Hang Seng Index jumped 1.8 per cent to a three-week high.

This helped to buoy performance across Asian markets, but trading volumes remained relatively thin. Japan’s Nikkei 225 rose 1.2 per cent. At home, the Straits Times Index ended 0.1 per cent lower at 3,807.97 points.

The cautious sentiment comes amid Trump’s promises to issue executive orders, focusing on immigration, energy and government reform, within “hours” of his swearing in. “Buckle up for the upcoming shock and awe,” warned Phillip Securities Research’s head of research, Paul Chew, noting widespread expectations of major tariff announcements.

“We believe higher tariffs by the US will hurt Asian currencies and equities as the US will be less impacted by any trade war,” he added.

Market watchers keeping an eye out for tariffs

Already, market watchers are expecting another turbulent four-year term as Trump completes his triumphant comeback and becomes the first US president since the 19th century to win a second term after losing the White House.

But with this come his pledges to test the limits of executive power, deport millions of immigrants, get retribution against his political enemies and transform his country’s role on the global stage.

Among other things, Trump has floated the idea of a 10 per cent universal tariff, which could disrupt international markets, and at least a 60 per cent tariff on China.

“The key uncertainty is the timing and magnitude of fresh Trump tariffs that may come into play once he takes office on Jan 20, and how much this may impact China and Asean GDP and trade growth prospects,” said Selena Ling, OCBC’s chief economist and head of global markets research and strategy.

“In particular, would Trump’s tariff threats kick in fairly quickly from January 2025 or later in the year?” she asked. “And would it be at 60 per cent for China, and 10 to 20 per cent for the rest of the world, or there is room for negotiation and deal-making?”

China demand 

Apart from the direct tariff impact, she pointed out that there could also be indirect effects from potential trade retaliation and risk-off market sentiments.

“Given the importance of China as a growth, trade and investment engine in Asia, a sharper growth slowdown in China could also hurt Chinese demand for Asean goods and services,” she said.

On the flipside, she added, the tariffs could drive China+1 diversification and a recalibration of global and regional supply chains. These are expected to present opportunities for Asean.

However, Barnabas Gan, RHB’s acting group chief economist and head of market research, warns that rising geopolitical tensions and the prospect of a broader trade war under the Trump administration will present risks for trade-dependent Asian economies such as Singapore.

“As a small, trade-dependent economy, (Singapore could be indirectly affected by) US-led protectionism... through second-order negative China-centric impact,” he said.

“Despite our generally optimistic outlook, we cannot overlook the potential negative impact of rising protectionism under the new US administration on global trade and investment,” he added.

For now, the ball is in Trump’s court, and investors globally will be keeping a close watch on his every move when it comes to executive orders.

But he could be stuck between a rock and a hard place.

Greenback strengthens

In a note on Jan 20, Maybank analysts noted that the Trump effect has so far been positive for the US dollar, US Treasury yields and Bitcoin.

However, the rallies, which have been substantial, could be running into fatigue.

“Any sign of a scale-back compared to the pledges he had made before in his campaigns could swing the USD lower given how much expectations – and fears – are being priced into the USD,” the analysts said.

“We remain of the view that the USD could be vulnerable to correction should Trump fail to deliver his bold promises.”