The U.S. dollar strengthened and Asian stock markets slumped following President-elect Donald Trump’s announcement of additional tariffs on China, Mexico, and Canada, escalating concerns about his “America First” economic policies. In a series of posts on his Truth Social platform, Trump declared his intention to impose a 10% tariff on Chinese imports and 25% tariffs on all goods from Mexico and Canada. The tariffs, he said, were necessary to curb illegal immigration and drug trafficking across the U.S. border.
In early trading, the Bloomberg Dollar Spot Index rose by as much as 0.7% before pulling back slightly, while the Chinese yuan dropped 0.4%, and both the Mexican peso and Canadian dollar fell more than 1%. Stock indexes in Japan, South Korea, and Australia also posted losses, while U.S. Treasury yields ticked higher.
Kieran Calder, head of equity research for Asia at Union Bancaire Privee, noted, “The incoming president is acting early, but this could surprise only those who have forgotten his approach from 2016 to 2020. This is Trump’s negotiating style—step one, make a bold move, step two, start negotiating.”
The Canadian dollar hit a four-year low in response to Trump’s tariff threat, while the Mexican peso hovered near its weakest point since 2022. Commodity-linked currencies, including the Australian and New Zealand dollars, also fell under pressure from China’s trade ties.
Carol Kong, a strategist at the Commonwealth Bank of Australia, commented, “Trump’s tariffs will likely give another boost to the U.S. dollar, with the Australian and New Zealand dollars weakened by their economic links to China.”
Contrasting the overall trend, Chinese stocks showed resilience. The CSI 300 Index reversed its early losses to rise by 0.4%, while Hong Kong’s Hang Seng Index gained 0.5%.
“Markets have been expecting tariffs, but the magnitude of the tariffs is the key,” said Ken Wong, Asian equity portfolio specialist at Eastspring Investments. “At this point, anything lower than a 60% tariff rate would be seen positively.”
Mainland Chinese equities may have benefited from dip buying after a two-day decline, as well as growing expectations that Beijing will ramp up fiscal stimulus to support its economy amid rising geopolitical uncertainties. The People’s Bank of China countered the dollar rally by setting its daily yuan fixing at a one-week high, signaling its commitment to maintain stability despite dollar volatility.
In commodities, gold edged higher after initially falling in reaction to Trump’s tariff comments. Bullion traded near $2,630 an ounce after a 3.4% drop on Monday, driven by easing tensions in the Middle East. Oil prices crept higher, while copper prices retreated.
Trump’s tariff posts followed a positive day for U.S. stocks and Treasuries, fueled by optimism surrounding his nomination of Scott Bessent as Treasury Secretary. Traders had hoped that Bessent’s background in hedge funds would bring a Wall Street perspective to the role. However, Bessent has expressed support for tariffs, as seen in his Nov. 15 Fox News op-ed, despite his recognition of Trump’s maximalist approach in negotiations.
Shoki Omori, chief desk strategist at Mizuho Securities in Tokyo, remarked, “The market overestimated the impact of the Bessent appointment. While he may attempt to manage the U.S. deficit, ultimately, Trump holds significant power over the country’s fiscal policies, suggesting a volatile four years ahead for global assets.”
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