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Donald Trump threatened to impose huge tariffs on Mexico and Canada, stirring financial markets just hours after taking office.
Speaking from the Oval Office late Monday, President Trump reiterated earlier threats to impose levies on two of the United States’ closest trading partners in retaliation for weak border security and fentanyl, potentially as early as February. He said there was a possibility of imposing 25% tariffs on both countries on the 1st. human trafficking.
The Mexican peso fell 1.1% against the U.S. dollar and the Canadian dollar fell 0.9% as Asia-Pacific opened Tuesday’s trading following President Trump’s new warning.
Both currencies soared on Monday after administration officials said President Trump would refrain from imposing immediate penalties on major partners and would instead investigate trade conditions.
The price move comes as investors this week come as President Trump lays out plans to ease many of Joe Biden’s signature policies and enact protectionist policies that weaponize America’s economic dominance. , particularly highlighting how they are preparing for turbulence in the foreign exchange market.
“This kind of volatility is the new normal,” said Eric Winograd, an economist at AllianceBernstein. “Policies under the Trump administration are likely to be less predictable and process-oriented than those we have become accustomed to under the Biden administration.”
Widespread selling in the dollar eased after President Donald Trump’s tariff comments, and the dollar index, a benchmark of the six countries’ currencies, pared a decline of as much as 1.3% to just 0.7%. Futures prices linked to Wall Street’s S&P 500 index also rose about 0.5%.
In a sign of how President Trump intends to use trade restrictions as a key diplomatic tool, the new president on Monday night slammed the European Union, threatening to impose tariffs on it unless it buys more U.S. oil. threatened the EU.
“They don’t take our cars, they don’t take our produce, they don’t take almost anything,” Trump said. “Yet we are taking away their cars, we are taking their produce, we are taking so much from them. So the solution is either we impose tariffs or they buy our oil. It will be.”
The euro, the dollar index’s biggest weight, was down about 0.5% against the dollar in early Asia-Pacific trading on Tuesday, at $1.04, partially reversing Monday’s 1% rise. The pound fell 0.4% to $1.23 after gaining 0.8% the previous day.
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In the Asian market, President Trump has imposed trade restrictions on China, even as he warns that he may impose them if the Chinese government refuses to hand over partial control of the social media app TikTok to the United States. Traders were relieved that the policy was not immediately implemented.
The CSI300 index of mainland listed companies rose 0.5%, and Hong Kong’s Hang Seng index rose 1%. The offshore yuan also rose to a six-week high of 7.25 yuan to the dollar.
“The short answer is that we could have avoided the worst-case scenario from a risk asset perspective. There were no tariffs on China from day one,” said Jason, head of Asia Pacific equities and derivatives strategy at BNP Paribas.・Mr. Louis said.
“China’s stock market… [already] The more measured reaction comes after Trump and Xi’s telephone conversation over the weekend, followed by a rally for the president’s inauguration. ”
Reporting by Adam Samson, Aim Williams, Harriet Klarfelt, Arjun Neel Alim, Leo Lewis, Nick Fildes
