EMERGING MARKETS-Vietnam, Thailand suffer most as US tariffs shake Asian markets

By Himanshi Akhand

April 3 (Reuters) - Stocks and currencies in Vietnam and Thailand tanked on Thursday, as the two Asian countries face among the highest reciprocal rates under U.S. President Donald Trump's sweeping new levies that threaten to escalate a global trade war.

Vietnam's benchmark stock index .VNI fell as much as 5.4% to a more than two-month low, and the dong VND= touched an all-time low of 25,802 per dollar.

Thailand's baht THB=TH weakened to its lowest level since mid-January and its equities .SETI slipped as much as 1.3%.

Trump announced a new baseline 10% U.S. tariff on goods from all countries, with far higher levies on some trading partners, particularly in Asia.

Besides Chinese imports, which will be hit with a 34% tariff on top of the 20% Trump previously imposed, Vietnam faces 46% levies, Thailand 36%, South Korea 25% and India faces 26%.

"Trump's tariffs on emerging Asian countries were notably high, sending a message that the U.S. was not just targeting China directly, but also indirectly blocking the 'China Plus One' strategy many companies use to diversify supply chains to circumvent U.S. tariffs," DBS analysts said in a note.

Vietnamese Prime Minister Pham Minh Chinh held an urgent cabinet meeting early on Thursday, state media reported, while Thai Prime Minister Paetongtran Shinawatra said the country will negotiate with the U.S.

"While there is openness to negotiation, it remains to be seen what measures Asian countries can take to significantly lower the tariffs they face," said Chris Kushlis, chief emerging markets macro strategist at T. Rowe Price.

"Measures such as counter tariffs and currency depreciation could trigger an additional tariff response from the U.S., resulting in further complication for regional policymakers," he said, adding that focus could likely be on supporting the domestic economies via monetary and fiscal stimulus.

Trump's new levies have rattled markets as fears grow that a full-blown trade war could trigger a sharp global economic slowdown, prompting investors to shun risky assets and move towards safe havens such as gold and yen.

The MSCI index of emerging market currencies .MIEM00000CUS hit a near four-week low, while MSCI's gauge of Asian emerging market equities .MIMS00000PUS dropped as much as 1.2% to a one-month low.

China's yuan CNY=CFXS touched a seven-week low, and stocks .SSEC tumbled 0.4%.

South Korea's won KRW=KFTC dropped 0.4%, and shares .KS11 fell as much as 2.7% to a three-month low.

The Indian rupee INR=IN weakened 0.3%, while Malaysia's ringgit MYR= fell as much as 0.6% to a two-month low.

HIGHLIGHTS:

Markets in Indonesia and Taiwan closed for a public holiday

South Korea's acting President orders emergency measures over U.S. tariffs