Since Trump's inauguration four weeks ago, Trump has imposed a 10 percent tariff on all imports from China, on top of existing levies. He has also announced, and delayed for a month, 25 percent tariffs on goods from Mexico and non-energy imports from Canada.

Trump told reporters on Tuesday that sectoral tariffs on pharmaceuticals and semiconductor chips would start at "25 percent or higher, and it will go very substantially higher over the course of a year." He intends to impose similar tariffs on autos as soon as April 2.

Market reaction to Trump's threats were muted as investors increasingly see them as bargaining tools, although the US dollar was on the front foot as geopolitical worries, including tense Russia-Ukraine negotiations boosted safe-haven flows.

"I think people are still trying to digest everything going on with not only tariffs and how that could impact things but also general valuations," said Sandy Villere, portfolio manager at Villere & Co in New Orleans. "We feel like the market is pretty expensive."

"You've got not only the tariff situation, which I think is going to be more saber-rattling and negotiating than anything long-term," Villere said.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.29 percent after touching a three-month high earlier in the session.

Chinese tech stocks have been on a tear recently as the emergence of AI startup DeepSeek and a meeting between Xi Jinping and business leaders in the sector lift sentiment.

"Green shoots are emerging in China’s economy and DeepSeek is injecting a shot of adrenaline into the sector," said Thomas Rupf, co-head Singapore and CIO Asia at VP Bank.

"While trade risks persist, tech optimism remains strong as the prospect of low-cost AI applications drives a reassessment of growth potential."

Hong Kong's Hang Seng Index fell 0.3 percent as investors pocketed some profits. The index has risen over 13 percent so far in 2025, jostling with Germany's DAX index for best-performing market in the world.

KIWI CLIPPED

The New Zealand dollar fell 0.35 percent to $0.5684 after the country's central bank flagged a steeper trajectory for future rate reductions following a 50 basis-point cut to 3.75 percent on Wednesday.

The latest easing was in line with expectations but the central bank is now forecasting the cash rate will drop to 3.4 percent in the second quarter of 2025 and to 3.1 percent by the end of 2025, lower than November's expectations.

The Australian dollar eased 0.11 percent to $0.6347 a day after the central bank delivered its first rate cut since 2020, but cautioned about the prospects for further easing.

Overnight, the US benchmark S&P 500 squeaked past its previous record closing high as all three Wall Street indexes seesawed between gains and losses for much of the session before rising in the closing minutes.

European shares ended at a record high, with banking and defense stocks among the top gainers. The pan-European STOXX 600 index hit an all-time high of 557.96.

European leaders vowed to step up support for Ukraine as the US and Russia held bilateral talks on the war this week. Investors also hope this weekend's German election will lead to economic stimulus.

Minutes from the US Fed's January meeting, when the central bank held borrowing costs at 4.25 percent to 4.5 percent, are due later on Wednesday. That follows hawkish comments from Fed Chair Jerome Powell in testimony to Congress last week and hot consumer price data.

Brent crude oil rose 0.11 percent to $75.92 a barrel as traders awaited the outcome of the US-Russia talks in Riyadh and speculated about potential supply increases if Washington agrees to abandon sanctions on Russian oil.

Spot gold was little changed at $2,933 an ounce, stalking the record high it touched last week on safe haven demand.