Risk-Off Sentiments Prevail in Asia Amid Tariff Concerns
The Asian markets are experiencing a notable risk-off sentiment as traders closely monitor Beijing’s response to U.S. President Donald Trump’s sweeping reciprocal tariffs imposed on China and several other Asian nations. On Wednesday, Trump declared new tariffs affecting imports from a staggering 180 countries, particularly targeting those he identified as the worst offenders, including China and the European Union.
The U.S. administration has introduced a new 34% tariff on goods from China, in addition to the existing 20% tax, which cumulatively escalates the total levy to a striking 54%—the highest imposed on any nation to date. Notably, Canada and Mexico remain unaffected by this latest round of tariffs.
Market observers suggest that the upcoming actions from China will be crucial, as their retaliation could significantly influence market dynamics. “Everything now depends on China. If Beijing decides to devalue the Yuan in response to today’s substantial U.S. tariffs, it could trigger a global risk-off sentiment that impacts emerging markets first and, if prolonged, eventually affects the U.S. markets as well,” stated Robin Brooks, managing director and chief economist at the International Institute of Finance, in a post on X.
In the early hours of Thursday, Beijing urged the United States to reconsider its tariff strategy and vowed immediate retaliation. Concurrently, the Chinese yuan depreciated to a seven-week low of 7 RMB/USD, contributing to losses in Asian equities and the emergence of a concerning death cross pattern in the cryptocurrency market, particularly for Bitcoin (BTC).
Allowing the yuan to weaken would render Chinese exports more competitive in international markets, offering a potential countermeasure to Trump’s tariffs. However, such a move could spell trouble for carry trades and instigate broader financial market anxieties, reminiscent of the turmoil observed in 2015 and 2018.
Additionally, any intervention by the People’s Bank of China (PBoC) aimed at curbing a rapid decline of the yuan could inadvertently bolster the dollar index, thereby exerting downward pressure on risk assets, including stocks and cryptocurrencies.
The negative implications of these developments are evident, as Asian equities traded in the red at the time of reporting, with Japan’s Nikkei index plunging to an eight-month low. U.S. stock futures also dropped by over 2%, signaling a prevailing risk-off mode across the markets.
Bitcoin (BTC), the leading cryptocurrency by market capitalization, was trading near $83,300, having experienced a decline from $88,000 to $82,500 following the announcement of Trump’s tariffs, as per data from CoinDesk. The cryptocurrency’s 50-day simple moving average (SMA) appears poised to cross below its 200-day SMA, potentially confirming the bearish technical pattern known as the “death cross.”
The current situation in BTC’s daily chart (as reflected by TradingView/CoinDesk) is particularly concerning, as the latest technical cross occurs against the backdrop of escalating trade tensions. This development warrants close attention, especially considering that options pricing now indicates a growing bias toward puts or downside protection as we approach the June expiry, according to insights from Deribit and Amberdata.
