The U.S. dollar surged, and Asian stock markets briefly reversed their early gains following President Donald Trump’s comments that he was considering implementing previously threatened tariffs on Canada and Mexico by February 1. The dollar strengthened against all of its Group-of-10 counterparts, except for the Japanese yen, as Trump discussed the possibility of imposing tariffs as high as 25% on the two neighboring nations. Meanwhile, U.S. Treasury yields rose, and major stock indices saw mixed performance across the region.
Trump’s remarks overshadowed the earlier optimism in global markets, with shares in Australia and Hong Kong rising, while China’s benchmark index remained mostly flat. Trump had refrained from announcing new tariffs on China during his first day in office, contributing to the stability in Chinese markets.
Charu Chanana, Chief Investment Strategist at Saxo Markets, noted that while the temporary delay in tariffs had provided some relief, the latest signals indicated that the threat was far from over. “The tariff respite was short-lived, as expected,” Chanana stated. “However, the focus seems to be on Canada and Mexico, with negotiations for China still on the table, which could provide some support to Chinese markets.”
Bloomberg’s dollar index rose by up to 0.7%, after starting the day lower. The Canadian dollar dropped by 1.4%, and the Mexican peso lost 0.9%. Meanwhile, U.S. Treasury yields on 10-year bonds fell by 7 basis points to 4.55%.
Markets had been anxiously awaiting the first executive actions from Trump, who had promised to rapidly enact his “America First” agenda. Investors have been jittery since his election in November, with concerns that widespread tariffs could exacerbate global trade tensions. At the same time, the dollar strengthened as the Federal Reserve adopted a more cautious stance on interest rate cuts.
Trump justified the tariff threat, saying, “We’re thinking in terms of 25% on Mexico and Canada, because they’re allowing vast numbers of people into the country.” He confirmed that the tariffs would likely be implemented by February 1.
Although Trump did not announce any tariffs targeting China, he directed his administration to assess whether Beijing was upholding trade commitments made during his first term and to address broader unfair trade practices.
The 25% tariff on Canada and Mexico was described as “aggressive” by Kok Hoong Wong, head of institutional equities sales trading at Maybank Securities. “The tight February 1 deadline leaves little room for negotiation,” Wong added, suggesting that Hong Kong and China could also be affected by the broader trade moves.
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