Asian stock markets retreated sharply on Monday as renewed trade tensions between the United States and Europe, sparked by President Donald Trump's tariff threats, rattled investor sentiment. The sell-off coincided with data showing China's economic momentum continued to weaken in the final quarter of 2025.
Trump's tariff ultimatum targeted eight European nations—Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and Britain—with a threat to impose additional 10% import levies starting February 1, potentially rising to 25% by June 1 if no deal is reached regarding US acquisition of Greenland. This move raised fears of a broader transatlantic trade conflict, directly impacting risk assets.
Market indices across the region fell, with Japan's Nikkei dropping 0.8% and the MSCI Asia-Pacific ex-Japan index dipping 0.1%. US equity futures also weakened, with S&P 500 futures down 0.8%. The flight to safety was evident as the US dollar weakened against traditional havens like the Swiss franc and Japanese yen. Gold surged 1.4% to a record high of $4,660 an ounce, while silver jumped 3.3% to $92.93.
Separately, China's economy met its full-year growth target of 5% for 2025, but lost steam in the fourth quarter, expanding just 4.5% year-over-year, its weakest pace since early 2023. Domestic demand remained a significant drag, with retail sales growth missing expectations and fixed-asset investment contracting.
The European Union is preparing potential retaliatory measures, including reviving suspended tariffs on €93 billion of US goods and deploying its anti-coercion instrument. European leaders, including French President Emmanuel Macron and Swedish Prime Minister Ulf Kristersson, condemned the threats, and the ratification of the July 2025 EU-US trade deal is now in jeopardy.
Concurrently, a warning from Micron Technology about an "unprecedented" and intensifying global memory chip shortage, driven by AI infrastructure demand, is expected to constrain smartphone and PC production, adding another layer of uncertainty to global growth prospects.
