Asian stock markets fell sharply on Friday, with heavy selling in Japan and South Korea, as U.S. President Donald Trump's latest tariff announcement rattled investor confidence. Meanwhile, gold surged to a record high, reflecting a flight to safe-haven assets amid escalating trade tensions.

Trump's 25% Auto Tariff Triggers Market Sell-Off

Trump confirmed plans to impose a 25% tariff on imported vehicles, set to take effect next week. The decision has drawn global criticism from politicians and industry leaders, who warn of higher car prices and potential economic slowdowns.

With the global trade war widening, automaker stocks bore the brunt of the sell-off:

  • Japan's Nikkei index dropped over 2%, dragged down by sharp declines in Toyota and Honda.
  • South Korea’s benchmark index hit a two-week low, down 1.3%, as the auto industry is a key pillar of the economy.
  • Hong Kong’s Hang Seng index bucked the trend, rising 0.6%, as Trump signaled he might ease tariffs on China in exchange for a deal with ByteDance, TikTok’s parent company.

“U.S. tariffs on auto imports were expected, but they will still have major implications,” said Fred Neumann, Chief Asia Economist at HSBC. “Some manufacturers may shift supply chains or relocate production to mitigate the impact, but higher prices for U.S. consumers are likely.”

Automakers Respond with Production Shifts & Price Hikes

Several global automakers are already making adjustments to counter the tariffs:

  • Volvo Cars, Volkswagen’s Audi, Mercedes-Benz, and Hyundai have announced plans to relocate parts of their production.
  • Ferrari, which manufactures all its vehicles in Italy, has confirmed price increases of up to 10% on certain models.

Markets Brace for More Tariffs on April 2

Investors are now awaiting the reciprocal tariffs the U.S. is set to announce on April 2. Trump has suggested these may not be straightforward retaliatory measures, adding to market uncertainty.

"Tariff fears are driving another round of risk-off sentiment,” said Thierry Wizman, global FX & rates strategist at Macquarie. “Investors see tariffs as growth-restricting and inflation-inducing.”

Currency & Commodity Markets React

  • The U.S. dollar is on track for a quarterly decline, as concerns about economic slowdown mount.
  • The euro remained steady at $1.07942, poised for a 4% gain in the first quarter.
  • The Japanese yen strengthened to 150.76 per dollar, as traders expect the Bank of Japan to hike interest rates again.
  • Tokyo's core inflation rate accelerated in March, keeping expectations for a BOJ rate hike alive.

Gold Hits Record High Amid Trade War Fears

Gold prices soared to an all-time high, driven by safe-haven demand:

  • Spot gold climbed 0.58% to $3,073.31 per ounce.
  • The precious metal is up over 17% in Q1, marking its best quarterly performance since 1986.

Oil Prices Hold Steady Amid Supply Concerns

Despite global trade tensions, oil prices remained stable as traders assessed potential crude supply constraints:

  • Brent crude dipped 0.07% to $73.98 per barrel.
  • U.S. West Texas Intermediate (WTI) edged 0.07% lower to $69.87 per barrel.

Outlook: Markets Face Volatility as Tariff Deadline Looms

With Trump’s tariffs set to take effect next week and further U.S. trade measures expected on April 2, market volatility is likely to persist. Investors will closely monitor how automakers adjust their supply chains, how China responds to potential tariff relief, and how central banks react to inflation pressures in the coming weeks.