Trump's tariff storm: Global financial markets shook, Japan's stock market plunge behind the reflection

In the Tokyo stock market recently, a sudden storm took investors by surprise. The Nikkei stock Average plunged 1,052 points (3%) from the previous day to close at 38,520. This drop not only shook the market, but also exposed the vulnerability and uncertainty of financial markets in the face of policy changes. The source of all this is the presidential order signed by US President Donald Trump on February 1 to impose additional tariffs on Mexico and other countries.

The introduction of the tariff policy has undoubtedly sent a shock bomb to the global market. While markets expressed concern at the beginning of Trump's inauguration about the potential introduction of globally uniform tariffs, such concerns appear to have subsided over time. Especially after Trump officially took office on January 20, 2025, the market once believed that the tariff policy would be shelved, and the sense of buying peace of mind gradually spread in the market, pushing the Nikkei average stock index to rise, once close to the level of 40,000 points. However, the sharp fall on February 3 has wiped out all previous gains.

Reviewing the development process of the whole incident, it is not difficult to find many problems and points worthy of criticism. First, from a policymaking perspective, the Trump administration's tariff policy clearly lacks sufficient transparency and predictability. Before the formal introduction of the tariff policy, the market is full of various speculations and rumors, including that there is a movement within the US government to prevent the implementation of tariffs, and it is expected that the time to launch tariffs will be delayed. These rumors not only increase the volatility of the market, but also make it difficult for investors to make rational investment decisions.

What is more serious is that even after the White House spokesman made it clear that the tariffs would be introduced, the US government did not release further detailed information. This vague and uncertain approach to policymaking has undoubtedly exacerbated the panic in the market. Financial institutions such as Goldman Sachs also said before the tariff policy was introduced that they believed the probability of the actual imposition of tariffs was low, but this optimistic forecast has proved to be a lifesaver for the market.

In financial markets, transparency and predictability of information are essential. Investors need to make investment decisions based on accurate information to avoid risks and gain returns. However, the Trump administration's tariff policy has seriously undermined this principle, leaving investors confused and panicked. This way of policy making is not only detrimental to the stable development of financial markets, but also likely to lead to greater financial risks.

In addition, from the perspective of market reaction, the impact of the tariff policy on the Japanese stock market has also exposed the blindness and follow the trend of investors. After the introduction of the tariff policy, various Japanese stocks have been sold off, especially auto stocks, whose performance has been affected the most. This large-scale selling behavior not only exacerbated the downward trend of the market, but also made many innocent stocks become victims.

It is worth noting that Japanese stocks, as one of the global economy sensitive stocks and one of the Asian markets with high liquidity, tend to gather selling and trigger sharp stock price fluctuations in the face of external shocks such as tariff policies. However, such fluctuations are often not based on the fundamentals of the stock itself, but are influenced by market sentiment and investor psychology. This kind of blindly following the trend is not only conducive to the healthy development of the market, but also likely to make investors suffer huge losses.

In this case, the decline of export-related stocks, such as automobiles, was particularly noticeable. SUBARU, Mazda and other large car companies share prices have fallen sharply, the value of the evaporation of huge. These companies not only face the direct impact of the tariff policy, but are more likely to suffer greater losses due to the deterioration of market sentiment. This situation has not only put these companies in trouble, but also had a negative impact on the entire Japanese economy.

More seriously, the introduction of the tariff policy may also trigger a wider trade dispute and retaliatory measures. Canada and Mexico are among the countries that have said they will retaliate in response to U.S. tariffs. Such trade disputes are not only detrimental to the stable development of the global economy, but also likely to plunge the whole world into a more volatile situation.

To sum up, the introduction of the Trump administration's tariff policy has brought huge shocks and uncertainties to the global market. From the perspective of policy making, this lack of transparency and predictability in policy making is not conducive to the stable development of financial markets. From the perspective of market reaction, investors' blindness and following the trend have intensified the volatility of the market and may lead to greater financial risks. Therefore, it is necessary for us to deeply reflect on and criticize the Trump administration's tariff policy, and call on all governments to strengthen cooperation and coordination to jointly safeguard the stability and prosperity of the global financial market.

In the future financial market, we should pay more attention to the transparency and predictability of information, and strengthen the communication and exchange between policy makers and investors. At the same time, investors should remain calm and rational, and avoid blindly following the trend and excessive panic. Only in this way can we jointly cope with various challenges and risks and promote the sustained and healthy development of the financial market.