Trump's 'Liberation Day' Puts Asia In Its Line Of Fire

It's the not knowing that has Asia on a cliff's edge. This extends to what strategy the Trump team might be employing this week, as opposed to next or the one after.

Trump's mixed-signal tariffs on China are a case in point. Team Trump seemed to think the mere threat of taxes on Chinese goods, touted as high as 60% on the 2024 campaign trail, would shock Xi's Communist Party into submission.

And that Beijing would draw up an extensive list of preemptive concessions to make“Tariff Man” Trump happy. Instead, Xi's team made it clear they were looking forward to seeing Trump's concession list . Having called Trump's bluff, the White House quickly pivoted to tariffs - now at 20%.

Yet Team Xi has stood firm. No clear concessions, no efforts to compliment Trump or signal China might cave. This lack of fealty is putting China in harm's way as Trump's revenge machine turns its way.

The bigger question is whether China bears the brunt of Trump's bruised ego. Rather than bowing to Trump's provocations, leaders from Canada to Mexico to Denmark have pushed back. Greenland is clapping back at Trump World's designs on the island. Officials in Panama are rolling their eyes.

Enter Vladimir Putin for the coup de grâce. A few weeks ago, Trump was certain he'd scored the Russia-Ukraine ceasefire that eluded Joe Biden. Now, Putin is proving right the geopolitical wags who warned that he's playing Trump. Not to mention depriving Trump of the Nobel Peace Prize he craves.

Trump is now“pissed off” that Putin is dashing ceasefire hopes and is threatening 50% tariffs on nations that buy Russian oil. But mostly, Trump is miffed Putin exposed his art-of-the-deal schtick to be more myth than reality.

As so many world leaders brush Trump off, might the bullseye on China become even bigger in the weeks ahead? The impulse could be to go even harder at showing China who's the boss.

That would put Asia writ large in harm's way. Since the 1980s, Trump, then a New York real estate mogul, has blamed the region for stealing US jobs and prosperity in the most sinister terms. Back then, Japan was at the center of Trumpian ire.

At the time, Trump the businessman was a regular on daytime talk shows complaining about how Japan had“systematically sucked the blood out of America – sucked the blood out! They have gotten away with murder. They have ended up winning the war.”

Today, China inhabits the bogeyman role. It's more complicated, though, given Trump's oft-articulated affection for Xi. On January 23, for example, Trump said,“I like President Xi very much. I've always liked him.” Trump added that he's“always had a great relationship” with China's strongest leader since Mao Zedong.

Yet Trump and Xi seem on a collision course as the former realizes the latter isn't the junior partner he envisioned. This raises the odds Trump might supersize the revenge tour that Asia has been dreading all year, including levies of 60% or more on Made in China goods.

Wall Street, too. Along with increased tariffs, investors are trying to factor in the global fallout from Trump's spending cuts and the risk of a US recession. At the same time, there are concerns about a bubble in artificial intelligence stocks, seen in recent big declines in the tech-heavy Nasdaq 100 benchmark .

One concern is that hundreds of billions of dollars flowing into data center infrastructure are outpacing the need for such facilities. That's pulling the rug out from under shares in chipmaker Nvidia Corp and companies from Broadcom Inc to Microsoft Corp to Amazon to Alphabet Inc to Meta Platforms.

But the real fallout could be on the outlook for Asia's $41 trillion economy, and how it reverberates back on America. Trump's tariffs threaten to deal a generational blow to the region's development.

“Asia-Pacific economies are bracing for details of wide-ranging US tariffs,” says Helen Besier, an economist at Moody's Analytics.“The Trump administration has investigated the country's trade relationships and appears bent on hiking tariffs to neutralize any duties, policies or practices that it believes create an uneven playing field. Beyond the direct impact on targeted countries, the toll will multiply. Much of this region's trade is about components that come together as finished products destined for the US.”

Though China is standing its ground versus Trump, 2025 is proving to be an increasingly challenging year.

This week brought news of a slight improvement in manufacturing activity, as evidenced by China's official purchasing managers' index. The Manufacturing PMI quickened to 50.5 in March, its best performance in 12 months.

Even so, notes Carlos Casanova, senior Asia economist at Union Bancaire Privee,“support measures remain essential to sustain recovery in the first half of 2025.”

This may include the People's Bank of China easing monetary policy again. That's particularly possible as deflation pressures continue to bedevil officials in Beijing.

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Julian Evans-Pritchard, head of China economics at Capital Economics, says the PMI data suggest“infrastructure spending is ramping up again and that exports have so far remained resilient in the face of US tariffs.” Yet, he adds, China's economy likely grew noticeably slower in the first three months of 2025 than the last three of 2024.

Xi and Premier Li Qiang have pledged to step up fiscal policy moves to achieve this year's growth target of “around 5%.” Thus far, the priorities have been on giant trade-in programs for consumer goods to boost household spending and increased debt issuance to support the beleaguered housing sector.

For 2025, Beijing upped its budget deficit to around 4% of gross domestic product (GDP), up from 3% last year. It's a rare increase as Team Xi works to counter Trump's tariffs.

“The budget does allow for fiscal support to be stepped up further over the coming months,” Evans-Pritchard says, though US tariffs“will start to weigh on exports before long.”

Higher US tariffs on Chinese exports are also expected to hit domestic manufacturers in the coming months.
“The manufacturing sector faces downside risk in the second quarter as the external demand weakens, driven by the tariffs and the economic slowdown in the US,” says economist Zhiwei Zhang, president of Pinpoint Asset Management.“The big question is how much export growth will decline, and how quickly the fiscal spending will pick up to offset weaker exports.”

Fighting these downside risks is pivotal to Xi making good on his pledge to create more than 12 million new urban jobs in 2025. Trump's trade war, though, is generating unprecedented headwinds everywhere, including the globe's biggest stock bourses.

The fallout could see Asia's consumers and investors pulling back in ways that crimp US growth, too. And three of Asia's four biggest economies striking a grand bargain trade deal with Trump Nation nowhere in sight.

Follow William Pesek on X at @WilliamPesek

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