Why Goldman Sachs thinks Trump's tariffs may not be that bad for Asian markets

• Trump’s tariffs may pose less threat to Asian markets than initially feared, wrote Goldman Sachs analysts.
• Tariffs may hurt markets, but if there’s clear information about them, investors would feel less negative.
• North Asian markets face higher exposure, while Southeast Asia markets are less affected.

President Donald Trump’s tariffs on Asian trading partners may ultimately pose less of a threat to regional markets than investors initially feared, according to analysts at Goldman Sachs.

Although the tariffs are expected to have a lingering impact, they could actually support investor confidence. But investors need clarity on what’s coming, analysts at Goldman Sachs wrote in a Thursday note.

“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,” the analysts wrote.

Goldman points to market uncertainty — not the tariffs themselves — as the major concern for 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,” the analysts wrote.

They added that a stable and predictable tariff regime could actually improve investor risk appetite.

Trump has notified around two dozen countries that new levies on their goods will begin on August 1 unless new trade deals are reached.

Goldman Sachs' analysts said the impact of the US's tariffs may not be as severe as feared, given the differences among regions and sectors.

North Asian markets in Taiwan, South Korea, and Japan would face the highest revenue exposure to the US within Asian equity markets.

By contrast, Southeast Asian markets and domestically oriented sectors — including utilities, banks, telecoms, and real estate — are far less exposed.

"The impact of tariffs will therefore not be evenly distributed," the analysts added.

Still, downside risks remain. Regional earnings could drop by 1% for every 5 percentage-point increase in tariffs, Goldman Sachs' analysis shows.

"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," they wrote.

Lower US short-term interest rates and a weaker dollar could partially offset the damage.

The Federal Reserve's easing cycle may drive investors toward higher-yielding assets in Asia. A weaker dollar could also help Asian firms that rely on dollar-denominated borrowing, indirectly supporting growth.

Asia markets sold off sharply after Trump made his first tariff announcement on "Liberation Day" but mostly recovered. Japan's benchmark Nikkei 225 is up about 1% year to date, while Hong Kong's Hang Seng Index is up 25% thanks to an extra boost from a Chinese AI-driven surge.

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