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Donald Trump sparked turmoil in financial markets hours after taking office, threatening to impose steep tariffs on Mexico and Canada.
In a speech in the Oval Office on Monday night, Trump said he could impose 25% tariffs on the two countries as early as February 1, reiterating previous threats to impose tariffs on the two closest trading partners of the United States. Taxes in retaliation for fragile border security and fentanyl.
Trump’s renewed warning sent the Mexican peso down 1.1% against the U.S. dollar and the Canadian dollar down 0.9% as Asian trading began on Tuesday.
Both currencies rose sharply on Monday after administration officials said Trump would not immediately impose taxes on major partners but instead study trade conditions.
The price swings underscored how investors are bracing for upheaval this week, especially in currency markets, as Trump unveils plans to roll back many of Joe Biden’s signature policies and enact a protectionist agenda that would push the U.S. economy Weaponization of influence.
“This kind of volatility has become the new normal,” said AllianceBernstein economist Eric Winograd. “Policy under the Trump administration is likely to be less predictable and less predictable than what we are used to under the Biden administration. Process-oriented.”
A broad sell-off in the U.S. dollar also eased following Trump’s comments on tariffs, with losses on the U.S. Dollar Index, which measures the greenback against six currencies, falling from 1.3% to just 0.9%.
Futures tracking Wall Street’s S&P 500 and Nasdaq 100 indexes opened flat on Tuesday morning after giving up earlier gains.
The new president lashed out at the European Union on Monday night, threatening tariffs if the bloc doesn’t buy more U.S. oil, signaling Trump’s intention to use trade restrictions as a key diplomatic tool.
“They don’t take our cars, they don’t take our produce, they take almost nothing,” Trump said. “Yet, we take their cars, we take their produce, we A lot is taken away from them. So we’re going to solve that through tariffs or they have to buy our oil.
The euro, the largest weighting in the U.S. dollar index, fell about 0.5% against the U.S. dollar in early Asia-Pacific trading on Tuesday to $1.04, partially reversing Monday’s 1% gain.
GBP/USD fell 0.3% to $1.23 after rising 0.8% the previous day.
Bitcoin prices briefly hit an intraday high of $109,241 on inauguration day, but later reversed their gains as the president did not mention cryptocurrency policy in his inauguration speech. On Tuesday, prices edged down 0.9% to $101,666 per coin.
In Asian markets, traders were relieved that Trump did not immediately impose trade restrictions on China, although he warned that Beijing could cede partial control of social media app TikTok to the United States if he refused to do so.
In trading on Tuesday, the CSI 300 index of mainland listed companies was flat and Hong Kong’s Hang Seng Index rose 0.9%.
The offshore yuan also rose to a six-week high of 7.25 against the dollar before weakening to 7.28.
“Simply put, from a risk asset perspective, we may have avoided the worst-case scenario. There were no tariffs on China on day one,” said Jason Lui, head of Asia Pacific equity and derivatives strategy at BNP Paribas. “
“Chinese stock market [already] That’s why the reaction was more cautious as people gathered at the inauguration after Trump’s phone call with Xi over the weekend.
Adam Samson and Harriet Clarfelt reported in New York, Aime Williams in Washington, Arjun Neil Alim in Hong Kong, Leo Lewis in Tokyo and Nic Fildes in Sydney
