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Donald Trump sparked an uproar on financial markets hours after his inauguration by threatening to impose significant customs duties on Mexico and Canada.
Speaking in the Oval Office on Monday evening, Trump said he could enact 25% tariffs against the two countries as soon as February 1, reiterating his earlier threats to hit two of the United States’ closest trading partners. United with taxes in retaliation for weak border security and fentanyl. traffic.
Trump’s renewed warnings sent the Mexican peso down 1.1 percent against the U.S. dollar and the Canadian dollar down 0.9 percent as trading began in Asia on Tuesday.
Both currencies appreciated sharply on Monday after administration officials said Asset would refrain from immediately hitting its key partners with levies and would instead study the commercial situation.
The price swings highlight how investors are bracing for this week’s upheaval, particularly in foreign exchange markets, as Trump implements plans to dismantle many of Joe Biden’s signature policies and adopt A protectionist program which militarizes America’s economic weight.
“This type of volatility is the new normal,” said Eric Winograd, an economist at AllianceBernstein. “Politics under the Trump administration will likely be less predictable and less process-driven than what we have become accustomed to under the Biden administration. »
Broad selling in the greenback also eased after Trump’s comments on tariffs, with the dollar index, which measures the currency against six of its peers, narrowing its fall from 1.3 percent to only 0.9 percent.
Futures tracking Wall Street’s S&P 500 and Nasdaq 100 indexes opened flat Tuesday morning after losing earlier gains.
In a sign of how Trump intends to use trade restrictions as a key diplomatic tool, the new president attacked the EU late Monday, threatening the bloc with tariffs if it does not buy more U.S. oil .
“They don’t take our cars, they don’t take our agricultural products, they take almost nothing,” Trump said. “And yet we take their cars and we take their agricultural products, we take a lot from them. So we’re going to deal with that either with tariffs or they’re going to have to buy our oil.
The euro, which has the biggest weight in the dollar index, fell about 0.5 percent against the greenback to $1.04 in early Asia-Pacific trading on Tuesday, partially reversing a gain of 1 percent on Monday.
Sterling fell 0.3 percent to $1.23 after rising 0.8 percent the day before.
Bitcoin prices, which briefly rose to a new intraday high of $109,241 on Inauguration Day, later reversed their gains as the president made no mention of cryptocurrency policy in his speech inaugural. On Tuesday, prices edged down 0.9 percent to trade at $101,666 per token.
In Asian markets, traders were relieved after Trump refrained from immediately imposing trade restrictions against China, although he warned he could do so if Beijing refused to cede control to the United States partial of the social media application TikTok.
The CSI 300 index of mainland Chinese-listed companies was flat at Tuesday’s midpoint and Hong Kong’s Hang Seng was up 0.9 percent.
The offshore renminbi also strengthened to a six-week high of 7.25 per dollar before weakening to 7.28.
“The short version is that we may have avoided the worst case scenario from a risk asset perspective. There have been no tariffs on China from day one,” said Jason Lui, head of Apac equity and derivatives strategy at BNP Paribas.
“The Chinese stock market has (already) rallied during the inauguration after the Trump-Xi phone call this weekend, which is why there is a more measured reaction.”
Reporting by Adam Samson and Harriet Clarfelt in New York, Aime Williams in Washington, Arjun Neil Alim in Hong Kong, Leo Lewis in Tokyo and Nic Fildes in Sydney