US President Donald Trump has signed an executive order revising reciprocal tariffs on dozens of countries.

In its Asia-Pacific market report, UBS forecasted that the weighted average tariff rate on US imports could climb above 18% (compared to less than 2.5% before Trump 2.0), a level not seen in 92 years.

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Notably, the proportion of US imports affected by these tariffs will remain below 50% (though up from less than 30% before the so-called "Liberation Day" on April 2, 2025). These figures could rise further when tariffs targeting industries exempted under Section 232 are announced and the impact of the global removal of de minimis exemptions proves difficult to quantify.

In UBS' opinion, the market has yet to fully appreciate the risks posed by tariffs. Since March 31, expected earnings for emerging market stocks with high US revenue exposure (defined as 25% or more) have only been revised down by about 2.5-3%, while stocks with no US revenue exposure have seen their earnings forecasts remain largely unchanged. In stress tests conducted by the emerging markets and Asia-Pacific research teams in April, the median expected EPS for companies with larger US business exposure was reduced by about 18%.

While overall corporate earnings data for 1H25 were moderate, UBS stressed that corporate commentary on the outlook is shifting, which could translate into earnings pressure in 2H25.

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The broker was bullish on the Chinese market (including all Chinese ADRs, H-shares, and A-shares in the MSCI China Index) and gave the Hong Kong market stocks a Neutral rating.