Asian Consumer Stocks Thrive in US-China Trade War

In April 2025, the MSCI Asia Pacific Consumer Staples Index has surged by 5% since the onset of a new wave of tariffs on April 2, outpacing all other sectors and defying a 2.5% decline in the broader regional benchmark. This remarkable performance highlights a profound shift in investor sentiment, as global markets grapple with the fallout from an escalating US-China trade war that has seen tariffs climb to 145% on Chinese goods and 125% on American products. Amid this economic turbulence, Asian consumer staples—companies providing essential goods like food, beverages, and household products—have emerged as a sanctuary for investors seeking resilience. This article delves into the dynamics driving this trend, exploring why these stocks are thriving, how investors are adapting, and what the broader implications are for financial markets.

The US-China trade war has reached a fever pitch, with tariffs escalating rapidly since early 2025. The Trump administration’s decision to impose a 10% tariff hike in February was followed by a 54% increase on April 2, culminating in a staggering 145% levy on select Chinese imports. China retaliated with 125% tariffs on US goods, disrupting global supply chains and stoking fears of a broader economic slowdown. The impact is stark: global merchandise trade is projected to contract by 0.2%, with China and Vietnam facing GDP losses exceeding 0.5%.

The MSCI Asia Pacific Consumer Staples Index’s 5% gain since April 2 underscores its status as a safe haven. Companies like Yonghui Superstores in China and Kobe Bussan in Japan have seen their shares soar by at least 19%, while beverage and dairy producers have also posted robust gains. This performance stands in stark contrast to the broader market’s struggles, highlighting the sector’s ability to weather economic storms.

As trade tensions mount, investors are increasingly turning to consumer staples for stability. Major financial institutions have taken note, with Goldman Sachs upgrading the sector to overweight from market weight on April 6, citing its domestic focus and defensive characteristics. Morgan Stanley has similarly advocated for a defensive stance, while Fidelity International has actively increased its holdings in Chinese consumer staples, particularly following the market sell-off on April 7.

Asian governments are bolstering consumer staples through aggressive fiscal stimulus. In China, authorities have introduced 48 measures to boost household spending in sectors like catering and healthcare, driving retail sales growth of 5.9% year-on-year in March 2025. South Korea has allocated 12 trillion won ($8.4 billion) to its supplementary budget to support consumption, while India’s forecast of an above-normal monsoon is expected to enhance rural demand for consumer goods.

While consumer staples thrive, broader Asian markets have shown mixed performance. On April 18, 2025, optimism about potential tariff resolutions—spurred by positive remarks from US and EU leaders—lifted several indices. Japan’s Nikkei 225 rose 1.03% to 34,730.28, Hong Kong’s Hang Seng gained 1.61% to 21,395.14, and India’s Sensex surged 1.96% to 78,553.20. However, China’s Shanghai Stock Exchange dipped 0.11% to 3,276.73, reflecting lingering concerns about the trade war’s impact.

The trade war’s ripple effects are reshaping financial markets, with distinct implications for various asset classes:

- Stocks: Consumer staples are outperforming, driven by their defensive appeal, while tech and discretionary stocks face pressure from tariff-related costs and reduced spending. The MSCI Asia gauge for consumer discretionaries has fallen over 5% since April 2.

- Bonds: US Treasury yields have climbed to 4.47% by April 11, reflecting inflation fears and supply concerns, reducing the appeal of bonds relative to defensive equities.

- Commodities: Gold has reached record highs as a safe-haven asset, while oil prices have softened due to demand concerns. China’s rare earth export suspension could drive price spikes for critical minerals.

- Real Estate: Higher inflation and interest rates may dampen real estate demand, particularly in export-reliant Asian economies, where economic slowdowns could reduce investment.

- Cryptocurrencies: Cryptocurrencies may see increased interest as hedges against fiat currency devaluation, but regulatory uncertainties and market volatility could cap gains.

- Consumer staples are projected to deliver earnings growth twice that of the broader MSCI Asia Pacific Index over the next 12 months, reinforcing their attractiveness for equity investors.

Despite their resilience, consumer staples are not without risks. A surge in inflation could erode consumer purchasing power, dampening demand for even essential goods. The sector’s sensitivity to inflation was evident during past periods of price spikes, which reduced investor enthusiasm. Additionally, a protracted trade war could indirectly impact domestically focused companies through supply chain disruptions or a global economic slowdown.

As the US-China trade war continues to shape global markets, Asian consumer staples stand out as a resilient and strategic investment. Their essential nature, bolstered by government stimulus and limited exposure to export risks, positions them for sustained outperformance. Investors should consider allocating to companies like Yonghui Superstores and Kobe Bussan, particularly in markets like China, where policy support is robust.