Tokyo Stock Market Plummets as Trump Tariffs Spark Global Trade Fears
On February 3, 2025, the Tokyo Stock Exchange witnessed a sharp decline, with the Nikkei 225 index dropping by 1,052 points (3%) to close at 38,520. This marked the first meaningful fall since November 1, 2024, and was largely driven by fears of escalating trade tensions following U.S. President Donald Trump’s decision to impose new tariffs on key trading partners.
The so-called “Trump Tariff Artillery” came into effect on February 1, targeting imports from Mexico, Canada, and China. Starting February 4, the U.S. will levy a 25% tariff on goods from Canada and Mexico, while imposing an additional 10% tariff on Chinese products. thes measures have sparked concerns of a full-blown trade war, with Canada and Mexico already vowing retaliatory actions.
Market Reactions and Expert Insights
Hiroko Ueno, chief strategist at Mitsui Sumitomo Trust Asset Management, expressed surprise at the tariffs’ implementation, stating, “I previously believed that tariffs were just a bargaining chip negotiated with other countries and did not think they would be truly implemented.”
the market had initially downplayed the likelihood of tariffs being enforced. Reports from The Wall Street Journal on January 31 suggested that the U.S. government was leaning toward preventing their implementation. Similarly,Reuters cited sources indicating that the tariffs might be postponed until March 1. Though, the white House’s confirmation on February 1 shattered these expectations, leading to widespread sell-offs.
Goldman Sachs analysts noted,“As of January 31,we conceived that the additional 25% tariff coudl be avoided at the last moment,with the probability of actual tariffs being about 20%.”
Impact on Japanese Stocks
The Japanese stock market,especially export-dependent sectors,bore the brunt of the sell-off. Automakers, which rely heavily on North American markets, were hit hardest. Subaru, with 80% of its sales profit coming from North America, saw its shares drop by 6%. Mazda, another major exporter to the U.S., fell by 9%. Toyota, Nissan, and Honda collectively lost approximately 3 trillion yen in market value over the weekend.
Langganghong,chief strategist at T&D Asset Management,explained,“Japanese stocks are not only globally sensitive but also serve as a highly liquid and easily tradable Asian market,making them a focal point for selling.” Matsumoto Shi Xiong of Oka San Securities added, “The Japanese market often reflects the adverse effects of tariff implementation first, leading to more severe reactions.”
A Broader Context
The timing of the tariffs coincided with the Chinese market’s closure for the Spring Festival, diverting investor attention to Japanese stocks. This exacerbated the sell-off, as traders sought to mitigate risks in a volatile environment.
Key Takeaways
| Aspect | Details |
|————————–|—————————————————————————–|
| Nikkei 225 Decline | Fell 1,052 points (3%) to 38,520 on February 3, 2025 |
| tariff Implementation| 25% on Canada and Mexico, 10% on China, effective February 4, 2025 |
| Automaker Losses | Toyota, Nissan, Honda lost ~3 trillion yen; Subaru fell 6%, Mazda fell 9% |
| Market Sentiment | Initial disbelief in tariff implementation, followed by sharp sell-offs |
The sudden downturn underscores the fragility of global markets in the face of geopolitical uncertainties. As trade tensions escalate, investors remain on edge, bracing for further volatility.
For more insights into global market trends, visit Bloomberg and The New York Times.
