By Kevin Buckland

TOKYO (Reuters) – Asian stocks were heavy on Wednesday as investors fretted over what countries could be targeted for tariffs under incoming U.S. President Donald Trump, a day after he pledged new levies on Canada, Mexico and China.

The loonie and peso remained weak following sharp drops to multi-year lows on Tuesday, while the yuan edged back towards the previous session’s four-month trough.

Australia’s dollar, which is often used as a liquid proxy for the yuan given China is the country’s biggest trading partner, also inched back towards Tuesday’s four-month low.

However, the New Zealand dollar rebounded from its own multi-month lows after the country’s central bank opted to cut interest rates by 50 basis points on Wednesday, disappointing some in the market who had bet on a bigger reduction.

The safe-haven yen extended its strong run, climbing to a two-week high on the U.S. dollar, which was in turn weighed down by sagging Treasury yields.

Japan’s Nikkei was a stand-out underperformer again on Wednesday, declining 0.9%. The autos sector was the worst-performing industry group on the Tokyo Stock Exchange, dropping more than 3% as both the threat of tariffs and the drag of a stronger yen weighed on the profit outlook.

Taiwanese stocks lost 0.2%, while South Korea’s KOSPI rose less than 0.1%, struggling to bounce back from Tuesday’s 0.6% slide.

Mainland Chinese blue chips sank 0.4%, although Hong Kong’s Hang Seng managed a 0.1% rise.

MSCI’s broadest index of Asia-Pacific shares drooped 0.1%.

Weakness in Asian equities contrasts with gains for all three of the major Wall Street bourses overnight, and S&P 500 futures pointed to a further 0.1% advance.

Trump posted on his Truth Social platform early in Asia’s Tuesday that he would immediately put a 25% tariff on all products from Mexico and Canada upon taking office, and slap an additional 10% tariff on goods from China. He said those levies would remain until the countries clamped down on issues such as illicit drugs and migrants crossing U.S. borders.

“The theme on the day has been to buy America, and for some to begrudgingly open a Truth Social account, with confirmation that headline risk and the communication channels for price discovery in markets have officially evolved,” said Chris Weston, head of research at Pepperstone.

Compared with Trump’s first time in office, “he is far more prepared, has a clear game plan, and has the legal passage to execute without constraint,” Weston said. “Markets now expect bold action ongoing, with the noise in markets officially increasing even before inauguration.”

The yuan weakened 0.1% to 7.2650 per dollar in offshore trading, heading back toward the low of 7.2730 seen on Tuesday.

The Mexican peso edged down to 20.7000 per dollar, approaching the overnight trough at 20.8350.

Canada’s loonie also edged lower, though at C$1.40695 versus its U.S. peer, there was more cushion from the knee-jerk low of C$1.4178 seen in the previous session.

The U.S. dollar was more mixed against other major rivals, edging up to $1.0835 per euro and easing slightly to $1.25725 against sterling. It slipped 0.2% to 152.70 yen, after earlier reaching its weakest since Nov. 10 at 152.50 yen.

U.S. short-term Treasury yields edged lower to 4.2458%, extending this week’s pullback from Friday’s nearly four-month peak at 4.3810%.

Trading across markets is thinner than usual this week with the U.S. Thanksgiving holiday on Thursday, and many investors extending their break into Friday. Traders are also keeping an eye on a reading of the Federal Reserve’s preferred inflation gauge, the PCE deflator, due later on Wednesday.

With the dust settling after the initial market frenzy following Trump’s tariff threat, “investors seems to view this as more tactical rather than fundamental, but enough to trigger risk off ahead of the long weekend,” said Shinji Ogawa, head of Japan cash equities sales at J.P. Morgan.

The New Zealand dollar added 0.4% to $0.5856, while the Aussie eased 0.1% to $0.6469.

Leading cryptocurrency bitcoin attempted to find its feet after a four-day retreat from a record high of $99,830. It was last up 1% at $92,630.

Gold ticked up 0.2% to $2,637 per ounce.

Oil prices continued to tick lower as markets assessed the potential impact of a ceasefire deal between Israel and Hezbollah, ahead of Sunday’s OPEC+ meeting.

Brent crude futures fell 8 cents to $72.73 a barrel, while U.S. West Texas Intermediate crude futures were at $68.68 a barrel, down 9 cents.

Both benchmarks started the week with declines of more than $2 following multiple media reports that the warring sides had agreed to terms of a ceasefire.

(Reporting by Kevin Buckland; Additional reporting by Tom Westbrook; Editing by Christopher Cushing)

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