The record-breaking rally in Asian stocks is set to come under increasing pressure as Donald Trump’s tariff hikes start to sap earnings, some of the region’s biggest funds say.Markets are underestimating the impact on company profits of the higher US levies that are likely to crimp exports in coming months, according to T. Rowe Price Group Inc. and Franklin Templeton, among others. Shares in export-reliant South Korea and Taiwan are among the most vulnerable, they say.“Current earnings and margins for exporters have not yet fully reflected the impact of the recent tariff agreements,” said Clarence Li, a senior portfolio analyst in the equity division of T. Rowe Price in Hong Kong. “Our Asia and EM portfolios have reduced exposure to businesses that are heavily reliant on foreign exports as part of our risk management strategy.” .Asian stocks have powered ahead this year, with MSCI’s regional gauge surging more than 20% in 2025, outpacing the gain of about 12% in the S&P 500 Index. The Asian benchmark this week surpassed its previous all-time high set in early 2021, helped by abundant liquidity, a weaker dollar and an artificial-intelligence boom.The higher US tariffs — first announced by Trump in April — are heavily weighted against economies that have trade surpluses with the US, many of which are in Asia. The current levies include 34% on China, 50% on India, 19% on Indonesia and 15% on Japan. While US tariffs have surged, analyst estimated earnings for the MSCI Emerging Markets Index have declined only about 3% this year, according to Bloomberg Intelligence. .Asian Stocks Slip As Investors Await Fed Decision: Markets Wrap.Too PositiveThe current forecasts are too optimistic, according to BNP Paribas SA.“We do not believe tariff-related risks to forward earnings have been incorporated into forward earnings expectations and/or valuations,” said William Bratton, head of Asia Pacific cash equity research at the French bank in Hong Kong. “We see continued risk of Asia’s export earnings materializing below current forecasts.” Bratton said he’s most cautious about earnings from the export-orientated sub-industries in Northeast Asia, namely Japan, South Korea and Taiwan.Asia is particularly heavily exposed to the US as a source of export income, with more than $1.3 trillion of goods shipped from the region to the world’s biggest economy last year, according to data from the US census bureau. China alone exported $438.9 billion, Vietnam $136.6 billion and South Korea $131.5 billion.Secondary FactorsThe risk to corporate earnings extends beyond headline tariffs to incorporate factors that won’t immediately show up on balance sheets, such as supply-chain disruptions, Christy Tan, an investment strategist at Franklin Templeton in Singapore.“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,” she said..JPMorgan To Trim China, India Share In Flagship EM Bond Index.It’s not all doom and gloom for Asia though, due to potential positives that may counteract the blow from higher tariffs. These include expectations for central bank interest-rate cuts, kicked off by the Federal Reserve’s widely anticipated decision this week to resume policy easing.Asian economic data have also shown surprising resilience to the tariff hikes so far. Readings of manufacturing activity in recent weeks have revealed order books are growing from Thailand to Vietnam, while South Korean exports held up in August, and Thai shipments grew by double digits in July.Some fund managers though put that down to front-loading of exports in advance of the tariffs, and expect a greater impact after that process wears out.One sector they say is particularly at risk from tariffs is technology, which has been among Asia’s best performers this year.“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,” said Jerry Goh, investment director for Asian equities at Aberdeen Investments in Singapore. Taiwan and Korea would see among the biggest earnings risks due to their heavy reliance on the industry, he said. .China Targets Nvidia For Violating Anti-Monopoly Laws; Shares Down In Pre-Market Trading