[HONG KONG] Stocks struggled in Asia on Thursday as investors gave a lukewarm reception to the US-Vietnam trade deal, while the dollar eased ahead of key US jobs data that could impact Federal Reserve interest rates plans.
Attention was also on Washington as Republicans struggled to push Donald Trump’s tax-slashing budget bill through the House of Representatives amid warnings it will inflate an already ballooning national debt.
While the Vietnam agreement provided hope that other governments can reach agreements with Washington, dealers were cautious as it emerged that the country must still pay tolls of as much as 40 per cent for certain exports.
With less than a week left until the US president’s July 9 deadline to hammer out pacts to avoid his “reciprocal” levies, just three countries have done so – stoking worries his “Liberation Day” measures will kick in and spark fresh market turmoil.
In a post on his Truth Social platform, Trump wrote: “It is my Great Honor to announce that I have just made a Trade Deal with the Socialist Republic of Vietnam after speaking with To Lam, the Highly Respected General Secretary of the Communist Party of Vietnam.”
He said that under the “Great Deal of Cooperation”, imports of Vietnamese goods will face a 20 per cent US tariff, while goods that pass through Vietnam to circumvent steeper trade barriers – so-called “transshipping” – will see a 40 per cent tariff.
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
The news means Hanoi will avoid paying the 46 per cent tolls initially applied on the April 2 tariff blitz, though the cost of goods going into America will still surge.
Hanoi traders were unimpressed, with the Vietnamese capital’s stock market down in early trade.
A third record close in four days for Wall Street’s S&P 500 and Nasdaq also did little to lift buying sentiment elsewhere in Asia, with Hong Kong, Shanghai, Tokyo, Sydney and Wellington all falling.
Singapore, Seoul, Taipei, Manila and Jakarta edged up.
Trump said this week he will not push back his deadline to make more deals though he and some of his officials have said a number were in the pipeline.
South Korean President Lee Jae Myung said Thursday his administration was doing its “utmost” to secure an agreement.
However, he warned that “it’s certainly not easy, that much is clear. And to be honest, I can’t say with confidence that we’ll be able to wrap everything up” by the deadline.
The dollar continued to struggle as traders boosted rate cut bets after data showed the private sector unexpectedly shed jobs last month for the first time since March 2023, suggesting the labour market was slackening.
The reading came a day before the much-anticipated non-farm payrolls report that is used by the Fed to guide policy.
Traders widely expect the bank to cut rates twice this year but there is growing speculation that it could make three, with one possibly at the July meeting.
“Payrolls is the focus (Thursday), where consensus is for a 110,000 payrolls gain and a slight lift in the unemployment rate to 4.3 per cent,” said National Australia Bank’s Taylor Nugent.
“It would take more than that to dent (policy board) members’ comfort (that) the labour market is resilient enough to wait beyond July for more clarity on inflation and the outlook.”
Meanwhile, US Treasury yields rose amid fresh worries in the bond market over Trump’s “Big, Beautiful Bill” that cuts taxes as well as spending on programmes such as Medicaid.
Independent analysis suggests it will add US$3 trillion to the already-colossal US debt mountain, which observers warn could deal a fresh blow to the world’s top economy. AFP
