Trump's tariff risks are putting pressure on Asian stock markets, and the seasonal uptrend in July may be disrupted.

Due to concerns about tariffs and the macroeconomy, market sentiment has been hit, making it difficult for Asian stock markets to experience seasonal gains in July. As the July 9 deadline for countries to reach trade agreements with the United States approaches, the market is preparing for greater volatility. The uncertainty surrounding the negotiation results has become a major obstacle for regional stock markets to maintain the average return of 1.36% in July over the past ten years (the second best performing month of the year). Christian Nolting, Global Chief Investment Officer at Deutsche Bank Private Bank, stated that investors are "holding back on allocating funds to emerging Asia." He added, "Although the latest comments from senior negotiators suggest constructive progress has been made in negotiations with major trading partners in Asia, uncertainty remains high, given the year and a half of trade disputes during Trump's first term." While the MSCI Asia Pacific Index has risen for three consecutive months until June, reintroduction of higher tariffs on "Liberation Day" could potentially cause a significant drop in the stock market as it did in early April. Trump made it clear on Tuesday that the July 9 deadline for reinstating higher tariffs will not be postponed, and pressure on trade partners like Japan will be increased. As a result, the Japanese stock market led the decline in Asian markets on Wednesday morning, with the Nikkei 225 Index falling by about 1%. Even if a trade agreement is eventually reached, some degree of tariffs may still remain, which could hinder export-oriented Asian economies. Several Asian central banks have lowered their economic growth forecasts for this year. At the same time, the high interest rates in the United States may limit the room for further rate cuts by Asian central banks. Gary Dugan, CEO of the Global CIO Office, said, "The third quarter faces many dangerous pitfalls, including the possibility of higher inflation and slowing growth. We are not very convinced that the Fed will cut rates at the pace expected by the market." Of course, if the tariff results are more moderate than expected by the market, and if the Fed signals a more dovish stance, it may encourage funds to flow into Asian markets. Gary Tan, portfolio manager at Allspring Global Investments, mentioned that there is still room for the positioning of ACR HOLDINGS to rise. The Fed has not cut rates so far this year and has repeatedly emphasized evaluating Trump's tariffs on inflation. However, the Trump administration has been pressuring for lower borrowing costs, and recently two Fed officials have indicated that rate cuts could start as early as July. The MSCI Asia Pacific Index has risen by 12% so far this year, outperforming the US market, with stocks in South Korea and Hong Kong receiving renewed attention. However, some Southeast Asian countries are still facing pressure as they are most affected by tariffs. Chetan Seth, a strategist at Nomura Holdings, and others wrote in a recent report, "We expect the summer market to remain volatile." They advise, "Investors should focus on stock selection and specific themes that resist policy uncertainty and provide higher visibility."