Market Analysis

Image Credit: BBC

On Saturday, Trump imposed a 25% tariff on imports from Canada and Mexico and a 10% tariff on Chinese goods, set to take effect at 12:01 a.m. ET on Tuesday.  

The announcement triggered a wave of risk aversion among investors, leading to a global market selloff. Stocks first tumbled in Asia before losses extended to Europe and the U.S. By 9:45 a.m. ET, the S&P 500 had dropped 1.5%, the Nasdaq fell 1.9%, and the Dow Jones declined 1.2%.  

In Asia, Hong Kong’s Hang Seng Index initially lost up to 2.3% before closing flat, while Japan’s Nikkei 225 ended the day 2.7% lower. South Korea’s Kospi shed 2.5%, and Australia’s ASX 200 fell 1.8%. Taiwan’s Taiex dropped 3.5%, with chipmaker TSMC plummeting 5.7% after catching up with recent AI-related selloffs. Chinese markets were closed for public holidays and will reopen Wednesday.  

European markets also suffered losses. By 9:45 a.m. ET, the UK’s FTSE 100 had declined 1.4%, while the pan-European Stoxx 600 fell 1.3% after Trump signaled upcoming tariffs on EU goods. Former Spanish foreign minister Arancha González Laya described the move as an economic shock with serious geopolitical consequences.  

Auto stocks were particularly hard hit, with Honda, Nissan, and Toyota seeing significant losses in Asia, while European automakers like BMW, Stellantis, and Volkswagen each dropped over 5%.  

In currency markets, the U.S. dollar strengthened, with the Dollar Index rising 0.85%. The Canadian dollar plunged to a two-decade low, the euro slid 1%, and the dollar surged 1.5% against the Mexican peso. Analysts attributed the dollar’s gains to increased demand for U.S. assets amid expectations that tariffs would reduce imports.  

Cryptocurrencies also suffered, with Bitcoin falling 3.3% and Ethereum dropping 15% over 24 hours.  

Market sentiment shifted dramatically as investors adjusted to Trump’s move from rhetoric to action. Kyle Rodda, a senior analyst at Capital.com, noted that many believed the tariff threats were mere negotiation tactics, but that assumption now seems overly optimistic.  

Higher tariffs on major trading partners could fuel inflation in the U.S. and delay potential Federal Reserve rate cuts. U.S. West Texas Intermediate oil futures rose 2.6% early Monday.  

Goldman Sachs analysts warned that the global economic outlook, previously supported by steady growth, easing inflation, and expectations of lower interest rates, is now clouded by this trade uncertainty. Sectors from agriculture to automotive could feel the squeeze.  

Rodda emphasized that tariffs could hurt corporate earnings by shrinking profit margins and slowing economic growth, while increased market volatility could pressure valuations and reduce the likelihood of Fed rate cuts.  

Despite concerns, Trump defended his tariff strategy on Truth Social, acknowledging potential short-term economic pain but insisting it would be "worth the price."  

Deutsche Bank’s global head of foreign exchange research, George Saravelos, cautioned that investors who underestimated the impact of Trump’s trade policies must now reassess the broader economic and market implications.

Paraphrasing text from "Business Insider" all rights reserved by the original author.