Weekly Market Round-Up: March 3-7, 2025. Asian Market React to Trade Tensions, ECB Rate Cuts, and China's Growth Pledge

This week, Asian financial markets were shaped by U.S.-China trade tensions, central bank actions, and China's economic strategies. Investors reacted to evolving monetary policies and trade risks while navigating economic data releases. Here are the top five key events:

U.S.-China Trade Tensions Escalate with New Tariffs

• On March 3, the U.S. imposed new 25% tariffs on Canadian and Mexican imports, while raising duties on Chinese goods by an additional 10%.

• In response, China retaliated with 15% tariffs on key U.S. agricultural products, including wheat, corn, and chicken, with an additional 10% tariff on soybeans and pork, effective March 10.

• The tariff battle increased fears of slower global trade and economic growth, pushing Asian stock markets lower.

  
  

🔍 Market Impact: Asian equities saw higher volatility, with Chinese and emerging market indices struggling under trade concerns.

China's Leaders Reaffirm 5% Growth Target

• During China’s National People’s Congress, policymakers pledged to meet a 5% GDP growth target despite rising trade uncertainties.

• The government signalled more stimulus, raising its budget deficit target to 4% of GDP and focusing on AI, green energy, and domestic consumption.

• Inflation is expected to slow to 2%, as authorities push structural reforms to boost economic stability.

  
  

🔍 Market Impact: Investors expect proactive fiscal policies, but concerns over sluggish domestic demand and declining exports remain.

European Central Bank (ECB) Cuts Rates to Support Growth

• The ECB cut its benchmark deposit rate by 25 basis points, bringing it to 2.5%.

• This is the second rate cut this year, aimed at supporting a slowing European economy hit by weaker global demand.

• ECB President Christine Lagarde warned of trade war risks, emphasizing that tariffs could disrupt investment and employment growth in Europe.

• The euro initially strengthened on the news but later pulled back as markets digested slower economic growth expectations.

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🔍 Market Impact: Asian markets reacted cautiously, with investors watching whether other central banks (including the Bank of Japan) will follow ECB’s lead in easing monetary policy.

China's Trade Data Misses Expectations

• China’s exports grew only 2.3% in January and February, below the expected 5%, while imports fell by 8%, raising concerns over domestic demand.

• The trade surplus reached $170.52 billion, but analysts see weakening global demand and supply chain disruptions hurting export-driven industries.

• Government stimulus measures have yet to deliver a meaningful boost to trade activity.

  
  

🔍 Market Impact: Chinese markets faced mixed sentiment, as trade data suggested limited short-term economic recovery.

China's Central Bank Urged to Spur Domestic Consumption

• Advisers to China’s central bank (PBOC) have called for new policy tools to boost consumer spending and support the property sector.

• The proposals include expanding consumer credit, stabilizing real estate prices, and improving capital market liquidity.

• Despite previous government efforts, China’s property market remains weak, with analysts predicting no major recovery until 2026.

  
  

🔍 Market Impact: Investors are watching for PBOC policy actions, as stronger consumer-driven growth is needed to offset global trade headwinds.

Market Outlook

The combination of global trade uncertainty, central bank policy shifts, and slowing economic data presents challenges and opportunities for Asian markets.

Key watchpoints for next week:

✅ Further U.S.-China trade developments

✅ Any monetary policy guidance from Asian central banks

✅ China’s next steps in stimulating its economy

With higher market volatility expected, investors should stay cautious and diversified in their portfolios. 📍 Stay tuned for next week’s market update!