Asian markets started the week on a cautious note Monday as escalating trade tensions and concerns over artificial intelligence (AI) competition weighed on investor sentiment.
Trade Tensions with Colombia Spark Concerns
Market jitters were fueled by former U.S. President Donald Trump’s decision to impose a 25% tariff on Colombian imports, with the rate set to rise to 50% next week. The move came after Colombian President Gustavo Petro blocked U.S. deportation flights. Although Bogota initially retaliated with its own levies, the Colombian government later relented, agreeing to accept deported citizens.
Dane Cekov of Sparebank 1 Markets noted, “The situation with Colombia just shows how little it takes for Trump to use tariffs as a negotiation tool,” raising concerns about his broader trade approach.
The dollar strengthened against most major currencies following the developments, climbing about 1% against the Mexican peso, while gold edged closer to record highs as investors sought safe-haven assets.
Markets React to DeepSeek AI and Federal Reserve Anticipation
Adding to market volatility, the recent launch of China’s DeepSeek AI program has spurred fears of intensified competition in the AI sector. The program, developed at a fraction of the cost of its U.S. counterparts, threatens the dominance of tech giants like Nvidia, Alphabet, and Meta, which have invested billions in AI innovation.
Alexandr Wang, CEO of Scale AI, remarked, “What we’ve found is that DeepSeek is the top performing, or roughly on par with the best American models.”
In response, U.S. tech stocks fell sharply last week, and Asian chip and tech firms followed suit. Tokyo’s Nikkei closed down 0.9%, with major losses in SoftBank (-8%), Advantest (-8.1%), and Tokyo Electron (-5%). Shanghai, Singapore, Wellington, and Mumbai markets also posted losses.
Federal Reserve Meeting Looms
Investors are also bracing for the Federal Reserve’s first policy meeting of the year, where rates are expected to remain steady. However, concerns linger that Trump’s trade policies, coupled with tax cuts and deregulation, could reignite inflation, potentially prompting the Fed to rethink its monetary strategy.
Stephen Innes of SPI Asset Management called this week pivotal for global markets. “This week kicks off in Asia, setting the stage for a global market spectacle intensely focused on Trump’s economic agenda amidst key inflation reports and anticipated Fed guidance,” he said.
Key Market Figures (as of 0710 GMT):
- Tokyo – Nikkei 225: DOWN 0.9% at 39,565.80 (close)
- Hong Kong – Hang Seng Index: UP 0.7% at 20,201.14
- Shanghai – Composite: DOWN 0.1% at 3,250.60 (close)
- Dollar/yen: UP at 156.11 yen from 155.93 yen
- Euro/dollar: DOWN at $1.0458 from $1.0500
- Pound/dollar: DOWN at $1.2451 from $1.2484
- West Texas Intermediate Crude: DOWN 0.7% at $74.12 per barrel
- Brent North Sea Crude: DOWN 0.7% at $77.95 per barrel
As global markets continue to navigate geopolitical and economic uncertainties, the focus remains on Trump’s evolving trade policies, AI sector developments, and the Federal Reserve’s monetary stance.