Asian Markets Fall as Tension Rises Ahead of Tariff Deadline

By Kimberley Kao

Asian stock markets and U.S. futures were in the red Monday as remarks by President Trump stirred up already-tense markets bracing for tariffs to hit dozens of countries this week.

Trump took to Truth Social to announce that "tariff letters and/or deals" will be delivered starting Monday, and threatened an additional levy on countries aligned with Brics. Brics is a group of countries including Brazil, Russia, India and China.

"Any Country aligning themselves with the Anti-American policies of BRICS, will be charged an ADDITIONAL 10% Tariff. There will be no exceptions to this policy," Trump said.

That came after a Brics summit over the weekend during which the group released a joint statement voicing concerns about "the unilateral imposition of trade and finance-related actions, including the raising of tariffs and non-tariff measures which distort trade and are inconsistent with World Trade Organization rules."

Market sentiment is being weighed down by uncertainty around tariff negotiations, with U.S. Treasury Secretary Bessent warning that tariffs could revert back to April 2 levels if deals aren't reached, Saxo's APAC Research team said.

In Asia, only Vietnam has reached a deal with the Trump administration, while China has hammered out a form of truce.

Amid the tensions, equities started the week on a downbeat note. Japan's Nikkei Stock Average declined 0.5%, Hong Kong's Hang Seng Index fell 0.5% and China's Shanghai Composite Index was 0.3% lower.

Futures tied to U.S. indexes were also in the red. Dow futures were down 0.3%, while S&P 500 and Nasdaq futures were both down 0.4%.

Markets are likely to be volatile heading into the July 9 deadline, in what could be a momentous week for the global economy, Moody's Analytics economists said in a note.

Trump has said new tariff rates could range from 10% to 70%, with payments due by Aug. 1. He has indicated that there will no exceptions.

The timing and ultimate level of U.S. tariffs will heavily influence global trade, with Asia particularly vulnerable due to its role as the world's factory, Moody's Analytics said.

Base metals futures pointed lower in a reflection of the risk-off sentiment, with the three-month LME copper contract down 0.4%, while aluminum and nickel were 0.5% and 0.6% lower, respectively.

Spot gold was last 0.75% lower at $3,311.89 a troy ounce despite the heightened tariff concerns.

With worries about a slowdown in the U.S. economy gaining strength, focus is increasingly on rate cuts and that would potentially pave the way for another benign phase for gold, Maybank analysts said. That said, unilateral tariff threats by Trump could give the safe-haven metal a source of support, they added.

Bitcoin was up 0.25% at $109,477.

Elevated economic uncertainty has been weighing on the U.S. dollar, and it will be key to watch the U.S. Court of Appeals, which is set to hear arguments this month on whether Trump has overstepped in his tariff policies, said Paul Mackel, global head of FX research at HSBC. The U.S. dollar index was last down 0.1%.

Front-month WTI and Brent crude oil futures fell 1.3% and 0.6%, respectively, after the Organization of the Petroleum Exporting Countries and its allies announced Saturday they will increase oil production by a larger-than-expected amount in August.

The near-term outlook for markets will hinge on key trading partners receiving U.S. letters, and what terms are set, Nomura research analysts Chetan Seth and Ankit Yadav said in a report.

A later effective date would drive market optimism on potential tariff extensions or negotiations.

"We judge there is a risk that President Trump reinstates higher 'reciprocal' tariffs on major economies such as Japan and Europe," said Kristina Clifton, senior economist at Commonwealth Bank of Australia.

Financial markets appear complacent about tariff risks for now, and currency markets can expect volatility this week, Clifton said in a note.

Write to Kimberley Kao at kimberley.kao@wsj.com