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Asian markets tumble as Trump's tariff war escalates Markets slide as Trump's tariff war escalates
(about 2 hours later)
Asian shares slid on Monday after US President Donald Trump followed through on his promise to impose tariffs on Canada, Mexico and China. Shares in Europe and Asia slid on Monday after US President Donald Trump followed through on his promise to impose tariffs on Canada, Mexico and China.
The main European stock markets were all down more than 1%, while earlier Japan's stock market had closed down 2.7%.
The US dollar strengthened on the currency markets, rising to a record high against China's yuan, while the Canadian dollar plunged to its lowest level since 2003.
Investors are bracing for a turbulent period that could hit the earnings of major companies and dent global growth.Investors are bracing for a turbulent period that could hit the earnings of major companies and dent global growth.
Canada and Mexico are facing tariffs of 25% on their exports to the US. Chinese-made goods will face a 10% levy, in addition to existing tariffs.
Canada and Mexico have said that they will hit back with retaliatory tariffs while China promised "corresponding countermeasures" and vowed to challenge Trump's move at the World Trade Organization.Canada and Mexico have said that they will hit back with retaliatory tariffs while China promised "corresponding countermeasures" and vowed to challenge Trump's move at the World Trade Organization.
Trump has said the tariffs are necessary to halt the flow of illegal drugs and immigration into the US.Trump has said the tariffs are necessary to halt the flow of illegal drugs and immigration into the US.
Canada and Mexico are facing tariffs of 25% on their exports to the US. Chinese-made goods will face a 10% levy, in addition to existing tariffs. The US president has also said tariffs on the EU will "definitely happen", although he says while the UK is "out of line", a deal could be worked out.
Following the news, Hong Kong's Hang Seng Index was down 0.4%, Japan's Nikkei 225 was 2.6% lower, South Korea's Kospi tumbled 2.5% and Australia's ASX 200 fell 1.8%. "Investors are rattled at the prospects of a full-blown trade war breaking out," said Susannah Streeter, head of money and markets at Hargreaves Lansdown, adding they were "buckling up for a rollercoaster ride for the global economy".
Markets in mainland China remained closed for the Lunar New Year holiday. Shares in carmakers saw the biggest falls in Europe, with the sector set to be most at risk from disruption from the tariffs.
Meanwhile, the US dollar was showing strength, rising to a record high against China's yuan, while the Canadian dollar plunged to its lowest level since 2003. Stellantis – whose brands include Chrysler, Citroen, Fiat, Jeep and Peugeot – saw its shares drop by nearly 6%, while VW dropped 5.7%.
"The prospect of having a long and protracted trade spat between the world's two biggest economies is causing investors to take risk off the table today," said Tim Waterer, chief market analyst at financial services firm KCM Trade. Shares in drinks maker Diageo - which exports tequila from Mexico to the US - fell 3%.
"The other worry for investors is which countries may be on Trump's tariff hit list next." The tariffs announced by the Trump administration over the weekend target the United States' three largest trading partners.
The tariffs announced by the Trump administration over the weekend target the United States' three largest trading partners and the US president has threatened he might not stop there.
Trump has also vowed to impose tariffs on the European Union "pretty soon".
Chief investment strategist at investment bank Saxo, Charu Chanana, warned that while tariffs could be beneficial for the US economy in the short term, in the long run they pose significant risks.Chief investment strategist at investment bank Saxo, Charu Chanana, warned that while tariffs could be beneficial for the US economy in the short term, in the long run they pose significant risks.
"Repeated use of tariffs would incentivise other countries to reduce reliance on the US, weakening the dollar's global role," she added."Repeated use of tariffs would incentivise other countries to reduce reliance on the US, weakening the dollar's global role," she added.
Trump has said he will speak to Canada and Mexico's leaders on Monday about the tariffs which are due to come into effect at midnight on Tuesday.Trump has said he will speak to Canada and Mexico's leaders on Monday about the tariffs which are due to come into effect at midnight on Tuesday.