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Donald Trump’s tariffs shook markets early on Monday, with the Canadian dollar, Mexican peso and US stock futures sliding as investors rush to evaluate how the levies will affect America’s biggest trading partners.
The Canadian dollar got here under pressure as trading kicked off within the Asia-Pacific region, dropping 1.4 per cent to C$1.473 against its US counterpart — the bottom level since 2003. Mexico’s peso slid greater than 2 per cent to 21.15 against the dollar. The euro also lost 1 per cent.
US stock futures also fell sharply, with contracts tracking the benchmark S&P 500 losing 1.8 per cent and people tracking the Nasdaq 100 sliding 2.6 per cent.
Trading volumes are typically very thin early within the session, which may exacerbate price movements.
In Asia, Japanese equities slid in early trading. The exporter-oriented Nikkei 225 fell 2.3 per cent while the Topix index fell 1.8 per cent. The yen weakened 0.2 per cent against the dollar to ¥155.5.
In South Korea the Kospi index shed 2.2 per cent and the won dropped 0.9 per cent against the dollar to Won1,468.8. In Australia the S&P/ASX 200 index fell as much as 2 per cent.
China’s offshore renminbi, which trades freely, slid 0.5 per cent to Rmb7.3571 a dollar on Monday morning.
The steep declines got here after Trump on Saturday imposed 25 per cent tariffs on all imports from Mexico and Canada, with a lower 10 per cent levy for Canadian energy, and recent 10 per cent tariffs on imports from China. He also last week threatened levies against the EU.
Economists have warned that the tariffs are prone to speed up inflation within the US, something that pushed up Treasury yields and the dollar following Trump’s election in November.
“The clearest implication is a stronger dollar,” said Eric Winograd, chief economist at AllianceBernstein. “An extended dollar position is the cleanest, clearest expression of the trade war that’s now being launched.”
“The currencies that can suffer essentially the most are those against whom the tariffs are being imposed,” added Winograd, noting that “there’s a superb case to be made that the equity market will suffer slightly bit”.
Oil prices also climbed in early Asian trade, with international benchmark Brent crude up 1 per cent at $76.46 a barrel.
George Saravelos at Deutsche Bank said the tariff announcements were “at essentially the most hawkish end of the protectionist spectrum we could have envisaged”, and that markets needed to “structurally and significantly reprice the trade war risk premium”.
The Mexican peso has whipsawed in recent weeks as traders have scrutinised the brand new Trump administration’s announcements for clues about how quickly and the way extensive any recent levies can be.
“If the tariff stays on for several months the exchange rate will reach recent historic highs,” said Gabriela Siller, chief economist at Mexico’s Banco Base, referring to the variety of pesos per dollar. “If the tariff stays on it’s going to be a structural change for Mexico . . . and Mexico could go right into a profound recession that might take years to return out of.”
By comparison, BBVA Mexico analysts said they thought it was unlikely the tariffs would last long. Nevertheless, in the event that they did remain in place, he said they’d have a “very negative” impact on investment in Mexico and its competitiveness.
