Stock markets cautious as Trump signals new tariffs
Global stock markets were volatile on Tuesday as investors tried to digest what action U.S. President Donald Trump would take on tariffs.
In his inauguration speech, Trump did not announce new import taxes on his first day in office, but he later indicated that new tariffs on Mexico and Canada may be imposed on February 1.
European stocks opened slightly higher before retreating, while Asian stocks edged higher.
Trump has promised an ambitious agenda — including trade reform, lower taxes and cuts to government regulations — that has the potential to boost corporate profits.
But some economists warn the measures could also push up inflation, forcing the Fed to raise interest rates.
The dollar, which fell on Monday after the inauguration, regained some ground against some other major currencies including the pound and the euro.
Trump previously threatened to impose new tariffs on Canada, Mexico and China on his first day as president. While those plans did not materialize on Monday, they are still on the agenda.
“We’re looking at a 25 percent tax on Mexico and Canada because they allow large numbers of people to come in, and Canada is also a very bad abuser of large numbers of people coming in, and fentanyl coming in,” Trump said in the Oval Office.
In a presidential memorandum, he directed federal agencies to investigate why the United States continues to import more goods than it exports and to investigate potential unfair trade practices and alleged currency manipulation by other countries.
Trump also said that imposing new tariffs on China may depend on reaching an agreement on TikTok’s future. He said if Beijing blocked such a deal “it would be a hostile act”.
But he said the United States was not yet ready to impose tariffs on all imports.
During his campaign, Trump promised to impose a 10% general tariff on China and said he would impose a 60% import tax on China.
he has It says the tariffs will make Americans richer, although critics say the costs will likely be passed on to consumers.
The president also said he would create an “Internal Revenue Service” to collect all duties, levies and revenue from foreign sources.
On Tuesday, Hong Kong’s Hang Seng Index rose 0.9%, South Korea’s Kospi was flat on the day, Japan’s Nikkei 225 Index closed up 0.3%, and Australia’s ASX 200 Index closed up 0.6%.
In Europe, London’s FTSE 100 and Paris’ CAC 40 were unchanged at midday.
Danish offshore wind giant Orsted was a big loser, with its shares down 17% in early trading after it announced a $1.7bn (£1.4bn) impairment charge due to delays in US projects and Trump said it would terminate to wind farms.
U.S. futures expect U.S. markets to open higher on Monday after U.S. markets are closed for the Martin Luther King Jr. holiday.
Fiona Cincotta, senior market analyst at City Index, told the BBC’s Today program that in currency markets, “plans and discussions about taxing Canada and Mexico have caused those currencies to fall significantly”.
Oil prices fell on the prospect of increased supply, while Bitcoin rose on Trump’s pledge to support cryptocurrencies.
“Market sentiment was weakened during President Trump’s signing of the executive order in the Oval Office,” said Tim Waterer, chief market analyst at financial services firm KCM Trade.
“Investors heard clearer details about Trump’s tariff agenda, which hurt sentiment somewhat.”
Other analysts warned that Trump’s return to the White House would reintroduce unpredictability into markets.
Charu Chanana, chief investment strategist at Saxo Investment Bank, said: “The first hours of the Trump administration highlight that the policy environment will be dynamic again and markets should prepare for volatility.”
Trump adviser Judy Shelton said Trump’s “main priority is to reinvigorate the private sector.”
He wants to “liberate individuals through more economic freedom, lower taxes and less regulation,” she said.
She said tariffs were “a very effective negotiating tool” that would be used “with our nearest neighbors and largest trading partners, Mexico and Canada” on immigration.
She said tariffs would not necessarily spark inflation among Americans — people might not pay higher prices for imported goods and instead switch to U.S. producers.
