Markets react to Trump
It’s the first trading day since the US president made good on his promise to slap high taxes on imports to the US and announced higher-than-expected 25% tariffs on Mexican and Canadian goods.
In Asia, Japan’s Nikkei stock market fell nearly 3% and South Korea’s Kospi was also down more than 2.5%. Both countries are export-heavy nations with car manufacturing, which is vulnerable to further US import tax hikes.
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The stock market plummet continued as markets opened across Europe, with major indices across the EU seeing sharper declines than in the UK after Mr Trump pledged that the trading bloc would see tariffs in future.
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He was less certain about penalising the UK but the FTSE 100 was trading around 1.3% down on the open in afternoon dealing.
Fears about US tariffs hitting growth Europe wide played out, with the DAX in recession-hit Germany and French CAC down by more than 1.5%. Both were led down by carmakers.
US stock markets saw similar declines at the open on Wall Street with the Nasdaq falling 2% and the broader S&P 500 by 1.6%.
The dollar strengthened widely, with the peso in Mexico and Canadian dollar worst hit – the latter by almost one-and-a half cents.
The euro was another big casualty, dropping almost a cent at €1.0270. The pound was down almost a third of a cent at $1.2316, a near two-week low.
Euro weakening saw sterling hit levels not seen since the early days of the year at €1.2015.
‘The trade war has started’
“Trump’s trade war has started,” said Alvin Tan, head of Asia currency strategy at RBC Capital Markets in Singapore as the market reaction took hold.
Tariffs against Mexico, Canada and China are due to take effect on Tuesday.
The US president has also threatened to impose steeper tariffs elsewhere, telling reporters import taxes will “definitely happen” with the EU.
He said the UK “is out of line” on trade with the US and told reporters “we’ll see what happens”. But he said he was confident the situation “can be worked out” without tariffs.
Mr Trump is set to speak to the leaders of Canada and Mexico later but warned them against retaliating to his tariffs, saying: “We can play the game all they want.”
Read more: How Trump’s tariffs could impact consumers
Over the weekend. he announced he is imposing 25% tariffs on imports from Canada and Mexico, and hit China with a 10% levy. Both Canada and Mexico hit back with retaliatory tariffs.
However, the US president returned to Washington from Mar-a-Lago on Sunday night and brushed aside the reprisals.
“I love the people of Canada. I disagree with the leadership of Canada. And something’s gonna happen there,” he said.
“If they want to play the game, I don’t mind. We can play the game all they want.”
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Mr Trump said Americans could feel “some pain” from the developing trade war – and claimed Canada would “cease to exist” without its trade surplus with the US.
In a post on his Truth Social platform: “WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!). BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.”
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The Trump administration has said the tariffs are aimed at stopping the spread and manufacturing of the opioid fentanyl, as well as pressuring America’s neighbours to limit illegal immigration to the US.
But it risks a trade war and higher prices for American consumers.
Read more:
Trump says Canada should be ‘cherished 51st state’
Why has Trump targeted Mexico and Canada?
How Donald Trump’s tariffs could impact consumers
Meanwhile, Canada’s high commissioner to the UK Ralph Goodale, speaking to Sky News’ Kamali Melbourne, had a warning for allies.
He said: “I would just say to our allies around the world watch this closely, you could be next, and in the meantime, stand by your friends.”
He added Mr Trump’s words were a “salesman’s pitch” and despite the historically close relationship between the countries “we don’t want to be each other”.
