The past week saw intense market turbulence, particularly in Taiwan's stock market. On Monday, April 7, following the extended Tomb Sweeping Festival holiday, Taiwan's stock market faced significant downward pressure due to panic selling, stop-loss triggers, and margin calls. The TAIEX plummeted by 2,065 points (9.7%), marking the largest single-day drop in its history. TSMC hit the daily limit down, reflecting the impact of its ADR's decline during the holiday period.

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Later that evening, U.S. markets experienced a brief rally due to rumors that former President Donald Trump was considering suspending tariffs for 90 days on certain countries. However, this speculation was quickly refuted by the White House via CNBC, causing U.S. stocks to retreat again. The confusion originated from a comment by National Economic Council Director Kevin Hassett, who responded "Yep" when asked about the possibility of a tariff suspension. This response was misinterpreted as confirmation.

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By Wednesday evening, April 9, Trump tweeted "THIS IS A GREAT TIME TO BUY!!!" and later announced an immediate increase in tariffs on China to 125%, while simultaneously suspending reciprocal tariffs for 90 days on 75 other countries. This policy shift alleviated concerns over trade wars and economic uncertainty, sparking a rebound in global markets. Oil, copper, and gold prices also rose alongside equities.

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The suspension of tariffs was speculated to be driven by China's potential sell-off of U.S. Treasury bonds to increase borrowing costs for the U.S., or as part of Trump's negotiation tactics using anchoring effects—initially proposing steep tariffs before reducing them to encourage compliance with lower rates. Hassett acknowledged that signals from the bond market influenced Trump's decision to pause tariffs.

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On Friday, April 11, Taiwan's stock market rebounded strongly, breaking back above the 19,000-point mark after dipping below 18,000 earlier in the week. Investors are now focusing on TSMC's earnings report and further developments in tariff negotiations next week.

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2. Potential Impacts of Trump’s Tariffs on Japan and the Motives Behind Them

On April 2, Donald Trump claimed that, when factoring in non-tariff barriers, Japan effectively imposes a 46% tariff on U.S. products. In response, he ordered a 24% “reciprocal tariff” on Japanese imports. The announcement triggered market volatility, sending the Nikkei 225 to its lowest level since October 2023. Later, on April 9, Trump announced a 90-day delay in implementing the high tariff measure, during which only a 10% tariff would be applied. The Nikkei 225 rebounded 9.14% in a single day following the news. However, the rally was short-lived, reflecting lingering market concerns over the uncertainty of Trump’s trade policies.

Amid the turmoil, Japan began taking diplomatic steps. Reports indicate that the Japanese government will send representatives to negotiate with the U.S. on tariff and trade-related matters, suggesting there may still be room for compromise. Currently, U.S. tariffs on Japanese imports stand at 25% for automobiles and steel/aluminum, and 10% for most other goods. Among these, the auto industry—Japan’s largest export sector—is particularly vulnerable. In 2024, automobiles accounted for 28.3% of Japan’s total exports to the U.S., and the U.S. absorbed 46% of Japan’s total car sales. If tariffs are passed on to car prices, U.S. consumer demand for Japanese vehicles is likely to decline, which could result in a sharp drop in exports, a slowdown in GDP growth, and broader impacts on domestic production and employment in Japan.

Looking back at U.S.-Japan trade relations, history appears to be repeating itself. In 1985, the U.S., Japan, West Germany, France, and the U.K. signed the Plaza Accord, intervening in currency markets to address America’s trade deficit. This led to a more than 50% appreciation of the yen against the dollar over just three years and triggered a wave of Japanese corporate offshoring. On March 3 of this year, Trump again accused Japan of manipulating the yen, followed by the imposition of steep tariffs on auto imports—underscoring his dissatisfaction with the weak yen and his determination to reduce the U.S. trade deficit.

One of the possible goals behind Trump’s policy may be to push for a stronger yen, thereby weakening the U.S. dollar, improving the competitiveness of American exports, and ultimately revitalizing domestic manufacturing and trade—key components of his “Make America Great Again” agenda. Against this backdrop, whether a stronger yen will be used as a bargaining chip in tariff negotiations has become a topic worth watching. Even if yen appreciation could ease tariff pressures, it would still weigh on Japan’s export sector and broader economy. As such, Japan should continue to strengthen domestic demand to better withstand future external shocks.

3. In response to the impact of Trump's tariffs, the government has allowed the National Financial Stabilization Fund to intervene and stabilize the market.

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In response to the severe impact of tariffs imposed by the U.S. President Donald Trump, which disrupted Taiwan's industries and caused significant stock market instability, Taiwan's Ministry of Finance announced on Tuesday, April 8th, the activation of the National Financial Stabilization Fund to stabilize the market.

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Taiwan's National Financial Stabilization Fund has a total available amount of NT$500 billion (approximately US$15.16 billion), with plans under consideration to increase it to NT$1 trillion. Historically, interventions by the fund have led to notable rebounds in the stock market. Data shows that within one month after the fund enters the market, average stock gains are nearly 5%, with a 75% probability of positive returns during that period.

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However, according to legal regulations, the National Stabilization Fund is prohibited from announcing the list of targeted stocks before entering the market to avoid speculative activities that could further disrupt financial market order. Based on the holdings lists from the past few interventions by the National Stabilization Fund, the government seems to prefer selecting large-cap stocks, particularly electronic blue-chip stocks. In addition, the government usually enters and exits the market through the securities firms of the eight major state-owned banks, so investors can infer the flow of the National Stabilization Fund by observing the buy-sell activities of these banks.

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The detailed holdings of the National Stabilization Fund during its last three interventions are as follows: