It's a Risk-Off Day in Asia as Market Participants Look to Beijing's Response to Trump's Tariff Hike

It's a risk-off day in Asia as traders look to Beijing's response to U.S. President Donald Trump's sweeping reciprocal tariffs on China and other Asian nations.

President Donald Trump announced on Wednesday sweeping reciprocal tariffs on imports from 180 nations and an increment to the existing 20% tax on goods from China, in addition to raising the total levy to 54%, the highest for any nation.

However, the latest action will not affect Canada and Mexico, despite the fact that Trump previously threatened to impose a 25% tariff on all goods from the North American neighbors.

Now, the ball is in China’s court as the nature of its retaliation could determine the market reaction.

“Everything now depends on China. If China devalues the Yuan in response to today's large, additional US tariffs, that sets off a global risk-off that hits EMs (Emerging Markets) first and then - if it persists - spills back to the US. China has so far kept a very low profile. That may now end,” Robin Brooks, managing director and chief economist at the International Institute of Finance, said on X, formerly known as Twitter.

Earlier on Thursday, Beijing urged the U.S. to lift tariffs and vowed to retaliate immediately.

Meanwhile, the Chinese yuan dropped to a seven-week low of 7 RMB/USD alongside losses in the Asian equities and an impending ‘death cross’ on bitcoin (BTC).

Letting the yuan depreciate, which makes Chinese goods more attractive in international markets, is one way to counter Trump’s tariffs.

That said, it could spell trouble for carry (currency) trades and scare financial markets, as observed in 2015 and 2018. Besides, potential intervention by the People’s Bank of China (PBoC) to stall a rapid yuan decline can boost the dollar index, inadvertently weighing over risk assets, including stocks and cryptocurrencies.

It’s no coincidence that Asian equities traded in the red at press time, with Japan’s Nikkei hitting an eight-month low. The U.S. stock futures fell over 2%, presenting a picture of risk-off mode.

Bitcoin (BTC), the leading cryptocurrency by market value, traded at around $83,300, having dropped from $88,000 to $82,500 following Trump’s tariffs announcement, according to CoinDesk market data.

The 50-day simple moving average (SMA) of the cryptocurrency’s spot price appears on track to cross below its 200-day SMA, confirming what is known as the “death cross” bearish technical pattern.

Usually, a 50-day SMA crossing a 200-day SMA is seen as a сигнал of a short-term rally or a long-term bear market. However, the crypto market has displayed a surprising resilience to selloffs over the past year.

The 50-day SMA is currently at $83,700, while the 200-day SMA stands at $82,800. As BTC trades at $83,300, it is clear that the 50-day SMA will pass through the 200-day SMA later today or tomorrow.

This technical pattern is being observed amid heightened trade tensions between the U.S. and China, with both sides adding more tariffs on each other’s goods.

Earlier this week, Trump announced plans to impose a 34% tariff on goods imported from China in addition to the existing 20% tax, bringing the total levy to 54%, the highest for any nation.

The latest action will not affect Canada and Mexico despite the fact that Trump previously threatened to impose a 25% tariff on all goods from the North American neighbors.

According to reports, Trump is also planning to announce a new round of tariffs on goods from the European Union, which could further escalate the trade war.

The U.S. president has been a vocal critic of China's trade practices, which he claims are unfair to American workers and businesses. He has set out to renegotiate or withdraw the U.S. from several trade deals that he deems unfavorable to the nation.

In addition to the broad-based tariffs, Trump has also announced plans to impose tariffs on specific products, such as solar panels and washing machines.

These actions have been met with criticism from economists, who say that they will ultimately harm consumers and the global economy.

However, Trump remains committed to his agenda of using tariffs to balance the trade deficit and create jobs in the U.S.

It remains to be seen what impact these tariffs will have on the markets. However, they are likely to increase volatility and put pressure on equities and cryptocurrencies.

As Paymon Mohsin , crypto derivatives researcher at Amberdata, Inc., told CoinDesk in an email: “Volatility is still low out to June but there is a clear preference for puts (bearish) over calls (bullish) in