Tariffs have once again been the cause of major changes in markets and disruptions to supply chains.
The President announced on April 2 a set of import tariffs with rates that ranged from 10% to 49 %, that targeted nearly all major US trading partners.
The decision, which was unexpectedly large, has already caused a selloff of global equities. Consumer and tech stocks have suffered steep losses, while fears about long-term disruptions in the economy are growing.
Which markets and shares should investors be most concerned about?
New policy shock
This executive order introduces an import tariff of 10%, but the rates are much higher for specific countries.
Vietnam-made goods will be subject to a new 46% tax.
Cambodia, Indonesia, and Bangladesh are all subject to 49%.
China is facing an extra 34% tariff on top of the previous taxes, which brings its tariff burden up to 54%.
Imports from Japan are subject to a rate of 24%, while imports from the European Union face a 20% charge.
The average US tariff on imports has risen to 22% from 2.5% as recently as 2024.
According to Fitch ratings, this is the highest rating since 1910.
Trump described the decision in terms of reciprocity, saying it was a reflection on how other countries treated US exports.
Investors, analysts and business leaders claim that the policy creates uncertainty and economic risks with no timeline or framework.
Financial markets responded immediately.
US futures fell sharply. S&P futures were down by more than 3%.
Since its peak in December, the Nasdaq is down nearly 13 percent.
Investors fled for safety as the yield on 10-year Treasury fell to 4.08%. It was its lowest in six months.
The global stock market follows.
The Nikkei 225 index in Japan fell by more than 3 percent, while European stock markets dropped around 2 percent.
Dollar index fell 1.1% on the currency markets as traders priced lower growth expectations.
Footwear stock prices are down.
The hardest-hit brands were the footwear and apparel companies, which, in the last five years, have shifted production away from China and towards Southeast Asia and Vietnam.
In 2024 the US will import goods worth $136.6 billion from Vietnam, an increase of 19% compared to 2023.
Cost structures and profits forecasts have been thrown into chaos by the sudden tariff of 46% on imports.
Nike’s shares fell by more than 8 percent, underlining the fact that Vietnam produces 50 percent of Nike footwear and 30 per cent of Nike apparel.
Brand has already reduced its sales forecast for this quarter to reflect the cost increase expected from the tariffs imposed on China and Mexico.
The new Vietnam tariffs will add more pressure.
Adidas shares dropped 11% in Frankfurt to near 12-month lows.
In Vietnam, 39% of the footwear produced by the German brand is made. The remaining 23% comes from factories in Cambodia and Indonesia.
Puma stock dropped 8.5% to its lowest point since November 2016.
Although the company does not have a formal policy, it is still structurally linked to Vietnamese and Indonesian factories, which produce its core products.
The US stock market opened with a 15% drop in On Holding, a Swiss shoe brand.
Nearly two thirds of the company’s revenue comes from Americas, specifically the US.
According to filings with the regulatory authorities, it is one of the most vulnerable brands under the new tariff regime.
Deckers is the parent company of Hoka, Ugg and has 68 manufacturing partners in Vietnam. This makes it its second-largest production base, after China.
Shares fell over 4%, reflecting concern over margin erosion.
Shenzhou International fell by 18%, one of Asia’s biggest textile producers and major Nike supplier in Hong Kong.
This is the biggest fall in over three years.
UBS and Jefferies calculate that global retail prices would have to be raised by 5 to 12 percent to maintain current profits.
Many consumers may have to accept the price increases due to inflation fatigue, which will reduce their earnings.
What tech stocks are likely to struggle most?
Tech companies have also been under pressure, even though the main focus is on consumer products.
China’s new import tariffs include a 54% combined duty on nearly all products assembled there.
Apple’s shares fell 6.1% on Monday, their steepest single-day decline since September 2020.
Apple produces most of its hardware in China, which includes iPhones and iPads.
The new policy will have a direct impact on these goods.
Although the company pledged to invest $500 billion in US over four years including building a new plant in Houston these facilities will not mitigate cost shocks that are likely to occur soon.
Nvidia declined 4%. Nvidia designs its chips in the US and produces them in Taiwan. It assembles AI system in Mexico and China.
The country is still vulnerable to tariffs at the component level, particularly if Taiwan or Mexico follow as next on the list for scrutiny.
Alphabet lost 2.5% to 5%. Amazon, Meta and Microsoft also suffered losses.
This is a threat that will indirectly affect consumer electronics, network hardware and other products.
It reflects wider fears about digital taxes imposed by the EU and Asia.
The retail industry and its supply chain are hit hard
Large retailers who have global sourcing operations and brands were also affected.
Wayfair’s stock dropped by 12% as a result of its exposure to Vietnamese furniture that now faces a tariff of 46%.
Walmart lost 6% and Amazon lost just 5%. H&M, Inditex and Inditex both fell 4.5% and 3.3% respectively.
Textile and apparel manufacturers in Vietnam, Bangladesh and Cambodia are the main suppliers of these companies.
Those are the nations that have been hit most.
Vietnam will export $44 billion worth of textiles to the US alone by 2024.
According to CEIC estimates and OECD figures, tariffs impact the GDP of the nation by nearly 10%.
Cambodia and Bangladesh are both at risk of similar dangers.
The logistics of shifting manufacturing to another location, the specialization of workforces, and fixed costs are all obstacles.
The Asian economy will be the hardest hit
Vietnam has the highest exposure to US imports in Asia. 12% of GDP is linked directly and indirectly.
An estimated 5,5% of the Vietnamese GDP is at risk due to a tariff of 46%.
Thailand is facing a 3 % hit due to auto exports.
Taiwan’s export volume could decline as a result of its dependency on the US market, despite being exempted from tariffs.
Currency has begun to reflect the risks. The Vietnamese Dong dropped to a new record low at 25,803/USD.
Also, the Thai Baht and Taiwan Dollar were under pressure.
INR, PHP and SGD should outperform other currencies due to their lighter exposures and stable external balances.
The expectations of monetary policy are changing rapidly. In Korea, India and the Philippines are expected to cut rates.
The central banks are aiming to reduce the impact of economic downturns by reducing interest rates from 50-75 basis points.
Bottom line
Tariff regime will be long-term, especially in the absence of exemptions and renegotiations.
Trump has described the move as an attempt to “pry” open foreign markets, and force the reindustrialization of the US.
The challenge for businesses is urgent and serious.
Diversifying the supply chain, which was once an option to mitigate against China’s risk, is now out of choices.
Vietnam and Indonesia are the two main escape valves.
Relocation isn’t a quick fix.
The production of advanced electronic products and performance footwear requires highly-specialized infrastructure and labor, both of which are difficult to replicate overnight.
Tariffs are now a constant economic risk and not only a newsworthy event.
Global fragmentation has already impacted the financial statements of many companies.
The post Who are the largest losers as a result of tariffs on global markets? The ICD published the first article Tariffs hit global markets: who are the biggest losers?
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