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Duncan Robertson

Market Outlook

Asia Outlook

Outlook
14 April 2025

By

Portfolio Manager, TT Asia and TT Global-Smid Cap Strategies

Latest Asian economic and market outlook. 

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Equity markets have seen some very extreme moves as they try to make sense of the Trump administration's erratic tariff policy and its potential implications. US ‘liberation day’ tariffs were initially far more severe than we and other investors anticipated. They would have represented a major exogenous shock to the global economy and markets, being orders of magnitude larger than those announced in Trump’s first term. However, the tariffs seemingly became unsustainable economically, financially and politically for the US president, who almost immediately paused most of them, while doubling down on Chinese tariffs. Clearly the situation remains fluid and can change very quickly. As such, at this stage it is difficult to accurately quantify the impact, partly because we do not know what the end point of tariffs will be, and partly because of the lack of any modern historical precedent for such an unorthodox policy shift. This uncertainty is exacerbating market volatility.

Key factors to monitor will be negotiation efforts with various countries, further retaliatory measures from China, as well as any monetary and fiscal easing. Beijing has already announced countermeasures, andis likely willing to take some pain rather than be seen to capitulate to Trump. As it demonstrated through its protracted Covid policies, China has a high tolerance for such pain. It also has the ability tostimulate its economy to partially offset the impact of tariffs. Our base case is therefore that a deal between the US and China will not be achieved in the short term. However, the pause granted to the other countries is, in our view, very important for equity markets. Exactly what motivated Trump to pivot is unclear –perhaps it was the bond market, or the billionaires of the MAGA base. Whatever the cause, we now know that Trump has a pain threshold. It suggests he will be highly motivated to do deals with the other key manufacturing nations of Asia. This could mean that the impact on overall global trade and on US CPI will be significantly less than seemed to be the case just 24 hours earlier. And for those countries that do get a deal, there could be significant benefits as they look to gain export market share from China.

With regard tomonetary policy, markets began to price in a decidedly dovish response from the Fed, although this is far from certain given that tariffs are likely to increase inflation. On fiscal policy, Trump’s administration has talked of passing tax cuts this year to offset some of the tariff headwinds. There may also be further offsets to global consumers to the extent that slower growth results in a falling oil price and lower interest rates. Finally, this episode should accelerate the structural derating of the US Dollar, which we see as one of the key pillars of our medium/longer term positive thesis on Asian equities, although during global risk-off events it may still benefit from its traditional safe-haven status.

Important Information:

Nothing in this document constitutes or should be treated as investment advice or an offer to buy or sell any security or other investment. TT is authorised and regulated in the United Kingdom by the Financial Conduct Authority (FCA).

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