Trump’s planned levies on Asian partners may do less damage

In a Thursday briefing, Goldman Sachs analysts suggested that President Donald Trump’s proposed levies on Asian trade partners might prove less harmful to local markets than many had anticipated.

They added that although these duties are likely to leave a lasting mark, they might simultaneously enhance investors’ outlook, as reported by Business Insider.

“The fundamental growth impact may not be as negative as markets feared in early 2Q and the actual tariff announcements may serve as a risk-positive ‘clearing event’, even if the rates imposed are somewhat above current baseline expectations,” analysts wrote.

According to Goldman, it is the unpredictable policy rather than the tariffs that have unsettled investors.

“Market performance has been impacted significantly by uncertainty regarding the level of tariffs that may be imposed and the frequent changes to the policy outlook,” analysts wrote.

They noted that having a transparent and consistent approach to duties could encourage greater risk-taking.

Tariff increases could cut profits by 1% for every 5 points

The administration has warned over 20 countries that new tariffs on their exports will kick in on August 1 unless they secure new deals.

They cautioned that the burden of these tariffs would vary significantly across both geography and sector. In particular, markets in Taiwan, South Korea, and Japan face the greatest share of US-linked revenues.

Conversely, economies in Southeast Asia and sectors focused on domestic demand, such as utilities, banking, telecommunications, and property, are comparatively less affected.

“The impact of tariffs will therefore not be evenly distributed,” they said.

Nevertheless, potential downsides persist. Goldman Sachs estimates that each 5-point tariff hike could trim corporate profits by about 1%.

“Earnings forecasts for a given market could be impacted through the direct exposure of revenues to the US, the tariff pass-through rate, and the sensitivity of listed companies to the domestic growth backdrop.”

If US rates fall and the dollar weakens, investors may flow into Asian assets, and firms will find dollar loans cheaper, helping to soften the impact.

After the administration’s inaugural tariff declaration on “Liberation Day,” Asian equity benchmarks initially dipped but later rebounded. The Nikkei 225 has gained approximately 1% year-to-date, while the Hang Seng Index is up near 25%, buoyed by strong performance in Chinese AI equities.

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