Global markets winced as the US announced a new wave of tariffs on 2 April (April 3 – Malaysia Time), imposing a 10% baseline duty across a broad range of imports. 

Dubbed “Liberation Day” by President Donald Trump, the sweeping measures are seen as part of his administration’s broader economic agenda to reshore manufacturing and address trade imbalances. However, they also risk reigniting trade tensions and fuelling fresh market volatility.

Read our latest Fundamental Flash for key insights on the potential ripple effects to markets.

Initial Observations

Countries with sizable trade surpluses with the US could bear the brunt of the new wave of tariffs. Though, the degree of disruption will depend on each country’s economic structure and policy responses. 

Here’s our initial assessment of the key trading partners affected at the time of writing:

China
On the surface, China appears to bear the brunt of the tariffs. However, markets had largely anticipated these developments, and Beijing may counteract the impact through targeted stimulus measures. Any decisive policy action by the Chinese government could create an opportunity to increase exposure to Chinese equities.

Taiwan
While Taiwan faces a significant tariff burden, semiconductors have been largely spared this round. Still, a potential slowdown in US consumer demand poses a risk, particularly to the technology supply chain. Given these uncertainties, we are taking a more cautious stance.

India
India’s economy and equity market are predominantly domestically driven, making it more insulated from trade disruptions. While tariffs are a headwind, they are unlikely to materially derail India’s growth trajectory.

Korea
Korea, as a heavily export-driven economy, faces added pressure from trade restrictions. We remain selective on domestically focused sectors that are less exposed.

Malaysia
Sensitive sectors such as semiconductors have been excluded from the current round of tariffs. This is reassuring for Malaysia, as local technology sector, which forms the bulk of our exports remains unaffected for now. Additionally, there remains scope for lower tariff rates if individual countries successfully negotiate concessions with US counterparts.

ASEAN
For other ASEAN countries, Singapore and Indonesia seems relatively better positioned due to a lower direct tariff exposure. In particular, Indonesia is seen as less vulnerable due to its commodity-driven exports.
In contrast, Vietnam and Thailand, which previously benefited from supply chain diversification, could see some of these gains diminish if global MNCs seek other alternatives.

What’s Next?

A key concern is whether other economies will respond with countermeasures. Larger economies like the EU and China may seek to retaliate, but smaller economies are more likely to absorb the impact and seek negotiated concessions.

So far, China has responded with restraint, having navigated past tariff escalations before during Trump’s first term in 2018. Initial expectations are that Beijing would maintain a measured approach.

For Malaysia, while it remains too early to assess the full economic impact, the country’s Trade Ministry has signalled its intention to engage proactively with US authorities. Steps to address the trade imbalance are already in motion, as reflected in Malaysia Airlines' (MAS) recent purchase of Boeing aircraft. Further developments on this front will be closely watched.

Portfolio Positioning

The situation remains fluid, with tariffs seen as a key bargaining tool by Trump in broader trade negotiations. Given the range of possible concessions and outcomes, we are closely tracking policy responses from key markets. 

For our Asian portfolios, we would consider increasing exposure in China if government stimulus measures provide further support. Similarly, India is seen as more defensive due to its strong domestic-driven economy, which insulates it from external trade disruptions.

For our Malaysia portfolios, we have raised cash holdings to 10-15% as a safeguard amid prevailing uncertainty. At this stage, we remain defensively positioned, concentrating on high-quality, domestically driven large-cap stocks. Beyond the tariff impact, as previously highlighted, a potential domestic liquidity injection in the coming months will be key in supporting market recovery.