Asia’s stock markets are starting to feel the heat as Donald Trump’s tariff hikes begin cutting into corporate profits.

Fund giants including T. Rowe Price and Franklin Templeton are warning that companies across the region, especially in South Korea and Taiwan, are more exposed than investors think.

Export-heavy industries have enjoyed months of gains, but now the numbers aren’t adding up. And the White House isn’t backing down.

According to Bloomberg, the warning signs are coming from all sides. Clarence Li, a senior portfolio analyst at T. Rowe Price in Hong Kong, said, “Current earnings and margins for exporters have not yet fully reflected the impact of the recent tariff agreements.”

Clarence confirmed that they’ve already reduced their Asia and emerging market positions tied to exports. They’re not waiting around to see the damage unfold.

Exporters face hit as profits fall short

The rally has been huge. The MSCI Asia index has jumped more than 20% this year, way ahead of the 12% gain on the S&P 500. Investors rushed in, driven by cheap money, a weaker dollar, and the AI hype machine. That pushed the regional benchmark above its previous record from 2021.

But now the policy change from Washington is cutting through the noise. Trump’s tariffs, announced in April, are targeting the region’s top exporters.

The list is brutal: 34% tariffs on Chinese goods, 50% on India, 19% on Indonesia, and 15% on Japan. These aren’t symbolic. They’re aimed directly at countries with massive trade surpluses with the U.S., and almost all of them are in Asia.

William Bratton, head of Asia Pacific cash equity research at BNP Paribas in Hong Kong, said the current earnings forecasts are “too optimistic.” He warned that markets still haven’t priced in the tariff risk properly.

“We see continued risk of Asia’s export earnings materializing below current forecasts,” William said. He’s especially cautious about sub-sectors in Japan, South Korea, and Taiwan, all tightly tied to exports.

It gets worse. Last year, over $1.3 trillion worth of goods flowed out of Asia to the U.S. China shipped $438.9 billion, Vietnam $136.6 billion, and South Korea $131.5 billion. Those numbers explain why analysts think the damage hasn’t shown up in full yet. The initial impact might be delayed, but it’s coming.

Tech sector vulnerable as semiconductors targeted

The problem goes beyond the visible tariffs. Christy Tan, an investment strategist at Franklin Templeton in Singapore, said supply chain disruptions and shrinking margins won’t show up right away.

“Investors are expected to stay cautious over export-oriented companies and those exposed to tech sectors, as margin compression could be increasingly evident in months to come,” Christy said.

There’s also concern about the semiconductor industry. It’s been one of Asia’s top-performing sectors this year. But that strength is exactly why it’s now in the firing line.

Jerry Goh, investment director for Asian equities at Aberdeen Investments in Singapore, said, “There are concerns over potential tariffs on the semiconductor sector, which could weigh on Asia, given that it’s the center of the global semiconductor supply chain.”

Jerry said Taiwan and Korea would face the biggest earnings pressure due to how much they rely on chips. Some regional data still looks okay on the surface. Manufacturing numbers in Thailand and Vietnam have been strong.

Thai shipments grew by double digits in July. South Korean exports didn’t drop in August. But several managers say that’s just front-loading, companies rushing to export before the tariffs land.

There’s still a chance that rate cuts by the Fed and other central banks could soften the hit. But that’s not guaranteed to offset the blow. The rally was built on liquidity and hype. Now it’s getting tested by policy. And the numbers aren’t lying.

Everything points to one thing: Asia is vulnerable. The exposure to U.S. demand, the over-reliance on tech exports, and the delay in pricing in risks, it’s all catching up.

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