President-elect Donald Trump’s late-night post on Truth Social announced plans to impose a 10% tariff on goods from China and a 25% tariff on imports from Mexico and Canada, citing a need to address migration and illegal drugs. The announcement immediately unsettled markets, with the dollar strengthening and stocks falling across major global indices.
Immediate Market Impact
Asian markets were the first to feel the effects of the news. Japan’s Nikkei 225 index fell by nearly 2%, with Toyota and Nissan suffering losses of almost 3% and 5%, respectively. Taiwan’s Taiex also ended the day 1.2% weaker.
Currencies were also hit hard. The Mexican peso plunged over 2% against the dollar, while the Canadian dollar dropped 0.9%. The dollar index, tracking a basket of currencies, rose by 0.1% during London trading, having gained more in earlier Asian sessions.
In Europe, the Stoxx Europe 600 index slipped 0.6%, reflecting investor concerns about direct tariffs or secondary fallout from tariffs aimed at other regions.
Reactions from Analysts
Market analysts pointed to significant volatility in response to Trump’s announcement. Emmanuel Cau from Barclays described the situation as a “total yo-yo” for markets, which had earlier welcomed Trump’s nomination of Scott Bessent as Treasury Secretary.
“But by including Canada and Mexico on day one, it may open the door to faster tariffs on other trading partners,” said Jason Lui, head of Asia-Pacific equity strategy at BNP Paribas.
Implications for Trade
While Chinese stocks showed relative stability, the renminbi weakened by 0.2% against the dollar. Analysts attributed the resilience in Chinese markets to relief that the proposed tariffs were set at 10%, lower than expected.
“There’s an element of relief in Chinese markets over the announcement,” said Brian Arcese, portfolio manager at Foord Asset Management. “The 10% tariff is far less severe than some feared, though these numbers could change over time.”
Standard Chartered economists noted that during Trump’s first term, a 1 percentage point increase in US tariffs on China corresponded to a 1.5 percentage point decline in Chinese exports to the US.
Future Outlook
Investors now face the prospect of unscheduled, market-moving announcements reminiscent of Trump’s first term. The unpredictability stands in contrast to the structured policy communications during Joe Biden’s presidency.
European automakers were already feeling the pressure. Daimler Truck fell 3.7%, with Stellantis and Volvo also recording losses.
“The market is waking up to the negative factors from Trump’s policy agenda,” said Laura Cooper, head of macro credit at Nuveen. “It’s not just the sugar high of fiscal stimulus.”
Read more: Stocks Rally as Trump Picks Scott Bessent for Treasury Secretary
A Volatile Path Ahead
Trump’s announcement suggests the potential for further escalation in trade tensions. While his stance often includes a focus on negotiating deals, markets remain on edge as his policies unfold.
For now, global investors will be watching closely for further developments and their impact on international trade and economic stability.