Asian stock markets mostly dropped on Monday due to renewed concerns about international trade. This was sparked by former President Donald Trump’s recent threat to impose significant tariffs on Colombian goods as a consequence of Colombia’s refusal to accept deportation flights from the United States.
Traders were also looking at the implications of a new, less expensive artificial intelligence program from China, which claims to be better than its more established competitors. This has raised questions about the recent rapid growth in the AI sector and whether it can continue.
Last week, stock prices had risen significantly because there was hope that Trump would take a more moderate approach to trade now that he is back in office. He had previously hinted that he would not immediately impose heavy tariffs on China and other countries, which helped create a positive atmosphere in the markets.
However, the situation changed when Trump announced on Sunday that he would impose a 25% tariff on Colombian goods, which would increase to 50% the following week, and that he would revoke visas for Colombian government officials. This decision came after Colombian President Gustavo Petro had blocked deportation flights from the U.S.
In retaliation, President Petro had initially planned to impose a 25% tax on U.S. imports, but later backed down and agreed to accept the deported individuals, indicating that the two countries had resolved their disagreement.
Dane Cekov, an analyst at Sparebank 1 Markets, commented that this situation illustrates how quickly Trump is willing to use tariffs as a bargaining tool in negotiations.
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Traders were preparing for a busy week ahead, as the Federal Reserve was set to hold its first policy meeting of the year. While it is expected that the Fed will keep interest rates steady, investors will be closely watching for any comments from Fed Chair Jerome Powell. There are worries that Trump’s plans to impose tariffs while also cutting taxes and regulations could lead to inflation, which might cause the Fed to reconsider its approach to interest rates.
As a result of Trump’s actions against Colombia, the U.S. dollar gained strength against most currencies, increasing about 1% against the Mexican peso. Gold prices, often seen as a safe investment during uncertain times, were hovering just below their record highs.
Stephen Innes from SPI Asset Management noted that this week is crucial for global markets, as they will be focused on how Trump’s economic policies unfold alongside important inflation reports and guidance from the Federal Reserve. He mentioned that a significant number of companies, representing nearly 40% of the S&P 500’s market value, are set to release their earnings reports, which could either boost the recent market optimism or lead to a reassessment of investor sentiment.
On Wall Street, all three major stock indexes fell on Friday, with the S&P 500 retreating from its record high due to profit-taking and a decline in technology stocks following the introduction of a new AI program called DeepSeek. This program reportedly only cost $5.6 million to develop, raising concerns about competition in the tech sector, where major companies like Nvidia, Meta, and Alphabet have invested heavily in AI.
In Tokyo, tech and chip companies suffered losses, contributing to a decline in the Nikkei index. Notable drops included Advantest, which fell over 8%, and Tokyo Electron, which dropped nearly 5%. SoftBank, a significant investor in Trump’s AI initiative, also saw its stock plunge by more than 8%.
Alexandr Wang, CEO of Scale AI, mentioned that DeepSeek performs at least as well as the leading American AI models, further intensifying competition in the industry.
Overall, markets in Shanghai, Singapore, Wellington, Mumbai, Bangkok, and Manila also experienced declines, while Hong Kong saw a slight increase.
Here are some key financial figures from around 7:10 AM GMT:
- Tokyo’s Nikkei 225: DOWN 0.9% at 39,565.80 (closing value)
- Hong Kong’s Hang Seng Index: UP 0.7% at 20,201.14
- Shanghai Composite: DOWN 0.1% at 3,250.60 (closing value)
- Dollar to yen: UP at 156.11 yen from 155.93 yen on Friday
- Euro to dollar: DOWN at $1.0458 from $1.0500
- Pound to dollar: DOWN at $1.2451 from $1.2484
- Euro to pound: DOWN at 83.99 pence from 84.06 pence
- West Texas Intermediate crude oil: DOWN 0.7% at $74.12 per barrel
- Brent North Sea crude: DOWN 0.7% at $77.95 per barrel
