Asian markets saw mixed performance on Monday as fresh trade concerns emerged following Donald Trump’s announcement of significant tariffs on Colombian goods. Simultaneously, the launch of a cost-effective Chinese generative AI program raised questions about the future of the tech sector's valuation surge.

Trade Tensions Resurface

The markets reacted to Trump’s decision to impose a 25% tariff on Colombian imports—set to rise to 50% next week—after Colombia refused to accept deportation flights from the U.S. In retaliation, Colombian President Gustavo Petro initially imposed a matching 25% levy on U.S. imports. However, Colombia later reversed its stance and agreed to accept deportees, with Foreign Minister Luis Gilberto Murillo confirming that the “impasse” had been resolved.

The move underscored Trump’s continued use of tariffs as a negotiation tool. “Actions speak louder than words. The situation with Colombia just shows how little it takes for Trump to deploy tariffs,” said Dane Cekov of Sparebank 1 Markets.

Investors are also bracing for a pivotal week ahead, with the Federal Reserve set to hold its first policy meeting of the year. While no rate changes are expected, concerns remain that Trump’s economic policies—tariffs, tax cuts, and deregulation—could stoke inflation, potentially influencing the Fed’s monetary strategy.

Dollar Rises, Gold Nears Record High

The uncertainty surrounding trade policies bolstered the U.S. dollar, which gained against most major currencies, including a 1% rise against the Mexican peso. Meanwhile, gold, a traditional safe haven during volatile times, hovered just below its record high.

“This pivotal week begins in Asia, shaping a global market narrative focused on Trump’s economic agenda, inflation data, and Fed guidance,” said Stephen Innes of SPI Asset Management. He added that upcoming earnings reports from companies representing nearly 40% of the S&P 500’s market capitalization could either sustain the bullish sentiment or trigger a market reevaluation.

AI Disruption Raises Market Concerns

Tech stocks faced renewed pressure following last week’s launch of DeepSeek, a Chinese generative AI program developed at a fraction of the cost of its competitors. The program, developed for just $5.6 million, has sparked fears of increased competition for established players like Nvidia, Meta, and Alphabet, which have collectively invested hundreds of billions of dollars in AI.

Tech-heavy markets like Tokyo saw significant losses, with chip firms Advantest and Tokyo Electron dropping more than 8% and 5%, respectively. SoftBank, a key investor in Trump’s $500 billion U.S. AI infrastructure initiative, also fell over 8%.

DeepSeek’s arrival has amplified concerns about the sustainability of high valuations for major tech firms. “What we’ve found is that DeepSeek is the top-performing, or roughly on par with, the best American models,” said Alexandr Wang, CEO of Scale AI.

Mixed Market Performance

Tokyo’s Nikkei 225 ended 0.9% lower, dragged by losses in tech and chip stocks. Shanghai, Singapore, Wellington, Mumbai, Bangkok, and Manila also recorded declines, while Hong Kong’s Hang Seng Index rose 0.7%.

Key Market Figures (as of 0710 GMT)

• Tokyo – Nikkei 225: DOWN 0.9% at 39,565.80 (close)
• Hong Kong – Hang Seng Index: UP 0.7% at 20,201.14
• Shanghai – Composite: DOWN 0.1% at 3,250.60 (close)
• Dollar/Yen: UP at ¥156.11 from ¥155.93 (Friday)
• Euro/Dollar: DOWN at $1.0458 from $1.0500
• Pound/Dollar: DOWN at $1.2451 from $1.2484
• Euro/Pound: DOWN at 83.99 pence from 84.06 pence
• West Texas Intermediate: DOWN 0.7% at $74.12 per barrel
• Brent North Sea Crude: DOWN 0.7% at $77.95 per barrel
• New York – Dow: DOWN 0.3% at 44,424.25 (close)
• London – FTSE 100: DOWN 0.7% at 8,502.35 (close)