Trump drops more tariffs but markets take largely in stride

Asia market update: Trump drops more tariffs but markets take largely in stride; Focus on US Core PCE.

General trend and developments

- The Asia session promised to be a quiet one ahead of US Core PCE tonight, but then Pres Trump suddenly got busy on tariff announcements once again:

- Trump first imposed a 25% tariff on all big trucks (>10K lbs) from Oct 1st. Applies universally, likely overriding previous trade deals with South Korea and Japan (TBD).

- Then Trump imposed 50% tariffs on all kitchen cabinets, bathroom vanities and associated products, from Oct 1st.

- Trump then topped it off with the much-anticipated pharma tariffs for imported drugs that had been threatened for months. Branded and patented drugs into the US will be charged a 100% tariff from Oct 1st (unless the importer is building their pharmaceutical manufacturing plant in America). [Note: Trump had over recent weeks and months threatened pharma tariffs of as much as 200% for imported drugs].

- Aussie and Japan pharma stocks weaker at the open. Sumitomo Pharma -5.7% and Otsuka -4.3% Chugai -3.9%, Daiichi Sankyo -3.3%, TOPIX pharma -1.7%; China pharma stocks fell Innovent -2.9%, CSPC-2%; Indian drug-makers also fell -2 to -4% in early trading.

- Japan Fin Min Kato soon rode to the rescue for Japan by announcing a new facility at Japan Bank for International Cooperation (JBIC) for Japan's $550B investment package into the US [**Note: Japanese pharma and truck makers exposed by lack of US plants may get some new US factories built from all of this, paid for by the Japanese taxpayer].

- Overall markets initially unmoved amid the tariff announcements, with only sector-affected stocks seeing price volatility.

- Kospi was the exception, under-performing -3.0% with Hynix -6%, Samsung -3.7%. General weakness was seen in the Asia session, but nothing untoward.

- Late in the session, WSJ reported sources saying Trump Admin planned to reduce semi-conductor imports. Companies that don't keep an even ratio of imported and domestic chips would pay a tariff. Interestingly, Nasdaq FUTs and the Nikkei actually rose shortly after the announcement following a brief dip to session lows as the news hit.

- Prior to Trump’s new tariffs, the US economy saw lower weekly jobless claims, a hotter final Q2 GDP revision with strong Durable goods in August. Existing home sales were also solid yet prices largely stayed flat. USD rose 0.5% as commodity markets mostly tracked lower.

- China said to ask leading semi-conducting chip manufacturers to list domestically, including shifting Hong Kong planned listings to China mainland instead (including for DRAM-maker CXMT)..

- Reportedly China came to the table and agreed to the terms of the TikTok deal with Oracle, Silver Lake, and MGX (Abu Dhabi tech and AI fund) said to have 45% ownership of TikTok (15% each). Trump quickly signed an Exec Order to execute the deal.

- Then during the Asia session Bytedance reported to be setting up a new US company as part of US Tiktok restructuring – the first China-side indication that the deal would indeed go through. (Pres Xi had commented earlier in the week that “China government respects companies' wishes”).

- Amid the concern expressed by the South Korea govt in recent days about the sustainability of the Korea-US trade agreement without US guarantees such as FX swaps, the Trump Admin is reportedly 'fine tuning' the trade deal with South Korea. Took place amid the Korean NY Investment Summit where Pres Lee said that Korean stocks are undervalued and SK will reduce obstacles to foreign investors.

- Aussie bond auction was very strongly supported today ahead of the RBA rate decision next Tue, Sept 30th, which has a 96% market expectation of a hold.

- Tokyo CPI for September softer for all three numbers down to 2.5%.

- Yesterday, OIS chances of a BOJ 25bp hike in October rose to 58% (vs 53% day before) and by Dec at 76.5% (vs 74.5% day before).

- After recent heavy export falls Japan Sept 1-10 exports and imports rose strongly.

- Amid recent poor econ data out of New Zealand, Consumer Confidence actually moved up a healthy amount in September. NZ comments noted a "glass-half-full" interpretation is that confidence probably would have lifted by more were it not for the (poor) GDP headlines.

- Singapore Industrial Production for August down heavily, with pharmaceutical output -59% y/y.

- Wholesale retailer Costco in the US said in its post-earnings call that from a supply chain perspective has not seen any major changes since last quarter; Overall, supply remains relatively stable with no notable issues.

- US equity FUTs -0.1% to -0.2% during Asian trading.

Looking ahead (Asian-weighted releases, using Asian time zone)

- Fri 26th (Fri night US Aug Core PCE).

Holidays in Asia this week

- Tue 23rd Japan.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 8,779.

- Australia, India sign Mutual Recognition Arrangement (MRA) for some certified organic produce - Australia Agriculture Minister statement (update).

- Australia sells A$900M v A$900M indicated in 2.75% Nov 2029 Bonds: Avg Yield: 3.6679% v 3.4624% prior ; bid-to-cover: 5.97x v 3.69x prior.

- New Zealand Sept ANZ Consumer Confidence: 94.6 v 92.0 prior.

China/Hong Kong

- Hang Seng opens -0.8% at 26,272; Shanghai Composite opens -0.4% at 3,839.

- China said to ask leading semi-conducting chip manufacturers to list domestically.

- Various brokerage firms in China expect the A-share 'rally' to continue during Q4, they expect the index to continue to test new highs in Q4; brokers said to be recommending tech names - China Securities Journal [update].

- China PBOC: Launches international operations center for digital RMB (CNY) to advance currency internationalization (update).

- China MOF sells 3-year Sovereign Bonds at Avg Yield 1.5037%.

- China Premier Li Qiang said to meet Citadel and Blackrock management in NYC – press.

- *To set up new US company as part of UK Tiktok restructuring - post.

- (US) President Trump: Signs EO on TikTok, as expected; There could be a Govt shutdown; If so, it'll be on the Democrats [overnight update].

- Reportedly Oracle, Silver Lake, and (Abu Dhabi tech and AI fund) MGX will have 45% ownership of TikTok (15% each) - CNBC's Faber [overnight update].

- US Sen Grassley (R-IA, Finance Cmte Chair): We need China trade deal now to help farmers - X post [overnight update].

- Hong Kong Aug Trade Balance (HKD): -25.4B v -38.6Be [overnight update].

- China Commerce Ministry (MOFCOM): US should take steps to remove 'unreasonable' tariffs and create conditions to expand two-way trade (regarding soybeans) [overnight update].

- China PBOC sets Yuan reference rate: 7.1152 v 7.1118 prior.

- China PBOC Open Market Operation (OMO): Injects CNY166B in 7-day reverse repos; Net injects CNY412B across both 7-day and 14-day v drains CNY3.5B prior.

- China PBOC Open Market Operation (OMO): Injects CNY600B in 14-day Reverse Repos: Net injects CNY412B across both 7-day and 14-day v injects CNY261B prior.

Japan

- Nikkei 225 opens -0.2% at 45,670.

- *(JP) Japan Sept Tokyo CPI Y/Y: 2.5% V 2.8%E; CPI (EX-FRESH FOOD) Y/Y: 2.5% V 2.8%E.

- Japan releases weekly flows data [period ended Sept 19th]: Foreign buying of Japan equities: -¥1.75T v -¥2.03T prior; Japan buying of foreign bonds: ¥817.2B v ¥1.48T prior.

- Japan Sept 1-10 Exports Y/Y: +9.8% v -4.5% prior; Imports +13.1% v -16.1% prior (provisional).

- Japan Fin Min Kato: Decided to set up a facility at JBIC bank for Japan's $550B investment package into the US - financial press.

- Japan Chief Trade Negotiator Akazawa: Has no direct comment on Pres Trump's latest tariff announcements.

- Japan Finance Min Kato: Currently NOT intervening in the FX market.

- Japan sells ¥4.3T vs. ¥4.3T indicated in 3-Month Bills; Avg Yield: 0.4582% v 0.4569% prior; bid-to-cover: 2.66x v 2.81x prio.r

- Panasonic: Reportedly Electronics unit offering early retirement in Oct as part of plan to cut workforce by 10K this year – Nikkei [overnight update].

Korea

- Kospi opens -0.9% at 3,440.

- South Korea Sept Manufacturing Business Survey: 93.4 v 93.3 prior.

- South Korea will push for 24-hr operation of its FX market – Press.

- South Korea President Lee approval rating declines to record low of 55.0% - Press.

- US Admin reportedly aiming to 'fine tune' trade deal with South Korea; Targets similar agreement to Japan - White House official [overnight update]- South Korea said to

fire warning shots at North Korea commercial ship crossing the maritime border - Yonhap.

- South Korea Pres Lee: Korean stocks are undervalued; Will reduce obstacles to foreign investors; - comments from NY Investment Summit [overnight update]
- South Korea Pres Lee: North Korea is in the last stage of intercontinental ballistic missile development; North Korea has secured enough nuclear weapons to sustain regime [overnight update].

Other Asia

- Singapore Aug Industrial Production M/M: -9.7% v -4.1%e; Y/Y: -7.8% v -1.9%e.

- Thailand Dep Fin Min: Confirms no proposal to raise the VAT at the current time; credit rating is NOT major concern as foreign borrowing is 'very low'.

- Indonesia Central Bank (BI) Gov Warjiyo: Bank is stabilizing Rupiah 'boldly' in the markets - financial press.

- (EU) Trade Commissioner Sefcovic: Malaysia trade talks are at an early stage; Progress is promising on Thailand [overnight update].

North America

- (US) Trump admin plans to reduce semi-conductor imports - WSJ, citing sources.

- (US) Dept of War Sec Hegseth orders top US military leaders from around the world to Washington DC next Tuesday Oct 2nd, 2025; Meeting subject as yet unknown (update).

- (US) Pres. Trump: Great Numbers came out today on the Economy (3.8%!), and the SUCCESS we are having, but our Interest Rates are too high! - post on Truth Social.

- (US) Trump: 100% tariff on branded and patented pharma products, effective Oct 1st.

- (US) President Trump: imposing 50% tariff on 'all' kitchen cabinets, bathroom vanities and associated products, starting oct 1st.

- US Pres Trump: 25% tariff on all big trucks, effective Oct 1st - Truth Social Post.

- (US) SEC and Finra said to have reached out to crypto-Treasury companies to warn about 'leaks' and unusual trading – WSJ.

- (CA) Canadian Postal Union: All workers are on strike - Union statement.

- (MX) MEXICO CENTRAL BANK (BANXICO) CUTS OVERNIGHT RATE BY 25BPS TO 7.50%; AS EXPECTED; VOTE WAS 4-1.

- (US) Fed's Miran (FOMC voter, dovish dissenter): Some members concerned about tariffs driving inflation; Fed can move more gingerly once it gets to neutral - Fox Business.

- (US) Dept of War Sec Hegseth orders top US military leaders from around the world to Washington DC next Tuesday Oct 2nd, 2025; Meeting subject as yet unknown (update).

- (US) Aug existing home sales: 4.00M V 3.96ME; Median existing home price: $422.6K, +2.0% y/y; month supply unchanged at 4.6.

- (US) Aug preliminary Durable Goods Orders: 2.9% V -0.3%E; DURABLES (ex-transportation): 0.4% V 0.0%E; Capital Goods Orders (non-defense/ex-aircraft): 0.6% v 0.0%e; Capital Goods Shipments (non-defense/ex-aircraft): -0.3% v +0.3%e.

- (US) Initial jobless claims: 218K V 233KE; continuing claims: 1.926M V 1.932ME.

- (US) Q2 final GDP annualized Q/Q: 3.8% V 3.3%E; personal consumption: 2.5% V 1.7%E.

- (US) Aug advance goods trade balance: -$85.5B V -$95.4BE.

- (US) Q2 FINAL GDP PRICE INDEX: 2.1% V 2.0%E; CORE PCE PRICE INDEX Q/Q: 2.6% V 2.5%E.

- (US) WEEKLY EIA NATURAL GAS INVENTORIES: +75 BCF VS. +74 BCF TO +75 BCF INDICATED RANGE.

- (US) Sept Kansas City Fed Manufacturing Activity: 4 v 2e.

- (BR) Brazil Central Bank (BCB) Gov Galipolo: Reiterates how bothered we are by de-anchored inflation expectations.

- (US) US Agriculture Sec Rollins: US agriculture deficit seen near $50B this year; DoJ Antitrust division looking at high costs of fertilizers and seed.

- (TR) US Pres Trump: Could lift sanctions against Turkey; Praises Turkey for using US equipment and trade; Expects to make great trade deals with Erdogan.

- (US) Treasury $44b 7-year note auction results: draws 3.953% V 3.925% prior, bid-to-cover ratio: 2.40 V 2.49 prior and 2.63 over the last 12.

- (US) Fed's Logan (non-voter): The time has come for a new benchmark rate; Fed funds connection is fragile and could break suddenly; For the moment, Fed funds rate remains a viable target.

Europe

- (IE) Ireland Sept Consumer Confidence Index: 61.7 v 61.1 prior.

- (UK) Sept CBI Retailing Reported Sales: -29 v -31e.

- (EU) Trade Commissioner Sefcovic: Implementation of US-EU trade commitments are on track; Next focus is to jumpstart US-EU steel market collaboration - X post.

- (EU) ECB's Cipollone (Italy): ECB will act if inflation shifts significantly from 2% - press interview.

- VOW3.DE said to lower output and pause production at some German EV plants - press.

Levels as of 01:20 ET

- Nikkei 225 -0.6%, ASX 200 +0.1%, Hang Seng -0.5%; Shanghai Composite -0.1%; Kospi -3.0%.

- Equity S&P500 Futures -0.1%; Nasdaq100 -0.2%; DAX +0.2%; FTSE100 -0.1%.

- EUR 1.1657-1.1682; JPY 149.62-149.96; AUD 0.6531-0.6645; NZD 0.5756-5776.

- Gold +0.1% at $3,765/oz; BTC -1.9% at $109,830; Crude Oil +0.5% at $65.27/bbl; Copper +0.1% at $4.7925/lb.