SINGAPORE — Markets in Asia-Pacific were subdued in early trade on Tuesday, as investors weighed a possible thawing of U.S.-China trade relations as U.S. President Joe Biden floated the idea of tariff cuts on Chinese goods.
In Japan, the Nikkei 225 was down 0.4% in early trading, while the Topix was lower by 0.2%. South Korea’s Kospi was down 0.39%.
In Australia, the S&P/ASX 200 sat just slightly below the flatline. MSCI’s broadest index of Asia-Pacific shares outside Japan was lower by 0.11%.
In economic data for the day ahead, Japan is set to report data on its manufacturing activity for May.
Markets seemed to take the news as indicative of a potential thawing of US-China trade tensions, though it isn’t the first time tariff reductions have been floated.
economist, National Australia Bank
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As consumer prices heated up, the White House had said last month that it was looking at how those tariffs have contributed to inflation.
Those tariffs took effect in 2018 when the Trump administration imposed tariffs on billions of dollars worth of Chinese goods and Beijing retaliated with similar punitive measures, drawing both sides into a protracted trade war.
“Markets seemed to take the news as indicative of a potential thawing of US-China trade tensions, though it isn’t the first time tariff reductions have been floated,” wrote Taylor Nugent, an economist at the National Australia Bank. “While a cut to tariffs would help soften US inflation at the margin, reports suggest administration officials are concerned about appearing soft on China ahead of November congressional elections.”
In other trade news, the U.S. announced on Monday the Indo-Pacific Economic Framework with Asian partners including Australia, Japan and South Korea. The group wants to set international rules on the digital economy, supply chains, decarbonization and regulations applying to workers.
Currencies and oil
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 102.191 — rising from levels just above 102 earlier.
The Japanese yen traded at 127.74 per dollar, as it strengthened marginally from levels around 127.8 previously. The Australian dollar was at $0.708, lifting from around $0.704 earlier.
Oil prices were lower in the morning of Asia trading hours, with international benchmark Brent crude futures down 0.51% to $112.84 per barrel. U.S. crude futures slipped 0.5% to $109.73 per barrel.
— CNBC’s Ted Kemp contributed to this report.