Trump Tariff Nightmare Plagues Markets as US Dollar Dives on Trade War, Recession Fears

No one will be left unscathed as world's two largest economies lock horns, say analysts

- Ovais Subhani

Singapore stocks plunged 8.2 percent this week and the US dollar sank as investors struggled to deal with an intensifying trade war between the United States and China, the world's two largest economies.

A midweek respite after US President Donald Trump announced a 90-day timeout on his tariff barrage failed to last. Instead, the Asia markets rally on April 10 turned the next day into what traders call "sell the rip." This refers to selling an asset after a rapid price increase to capture profits before the price falls—the opposite of "buy the dip."

Analysts said that while the tariff pause and the start of bilateral negotiations between the US and some trading partners was a welcome development, it does not give enough clarity on the risks that listed companies and the global economy are facing from the hit to consumers and the damage to supply chains.

Also, the pause does not address the elephant in the room—the US-China tit-for-tat trade war that now seems to be feeding on itself. Both the US and China are key sources of trade and investments for Singapore and most Asian economies.

China again struck back against US tariffs by raising its levies on US goods to 125 percent from 84 percent. This, after Mr. Trump on April 10 raised duties on China to a staggering 145 percent.

However, Beijing said it would ignore any further moves by Mr. Trump because it no longer makes economic sense for importers to buy from America, and any more US tariffs "will become a joke in the history of world economy."

Ms Erica York, a vice-president at the Tax Foundation's Centre for Federal Tax Policy, told CNBC that Mr. Trump's tariffs essentially cut off most trade with China.

"As things stand, the worst of the sentiment deterioration could be behind us, with market participants now watching to see what would happen in the next 90 days," said Mr Eugene Leow, senior rates strategist at DBS Bank.