Stock markets in the Asia-Pacific region experienced modest gains on Tuesday following President Donald Trump’s indication of possible new tariffs on Mexico, Canada, and China. Traders reacted cautiously after Trump pledged to initiate a “golden age” for America without announcing fresh import taxes on his first day in office.
Asia-Pacific stock markets gain amid Trump’s tariff hints
Trump has outlined an ambitious agenda that includes trade reforms, lower taxes, and regulatory cuts aimed at boosting corporate profits. However, some economists warn that these measures could lead to inflation, potentially prompting the Federal Reserve to increase interest rates.
In the Oval Office, Trump stated, “We’re thinking in terms of 25 percent on Mexico and Canada, because they’re allowing vast numbers of people… and fentanyl to come in.” He directed federal agencies to investigate ongoing trade imbalances and assess unfair trade practices and alleged currency manipulation by other nations.
New tariffs on China may be contingent upon the outcome of discussions regarding the future of the social media app TikTok, with Trump stating that if Beijing obstructs an agreement, it would be “somewhat of a hostile act.” He emphasized, however, that the US is not prepared to impose tariffs on all imports at this time.
During his election campaign, Trump proposed a universal tariff of 10% and expressed intentions to impose a 60% import tax on China. He has argued that tariffs will enrich Americans, although critics contend that such costs will likely be passed onto consumers. Additionally, Trump announced plans to create an “External Revenue Service” to manage the collection of tariffs and duties.
Dow futures rise 0.2%, Bitcoin smashes $109K pre-Trump orders
On Tuesday, Hong Kong’s Hang Seng index rose by 1%, Japan’s Nikkei 225 was up 0.1%, South Korea’s Kospi increased by 0.2%, and Australia’s ASX 200 gained approximately 0.6%. The US dollar also regained some strength against major currencies, including the pound and the euro.
Tim Waterer, chief market analyst at KCM Trade, noted that “market sentiment was dented during the signing of executive orders,” indicating that investors received clearer details on the Trump tariff plans, which impacted market mood. Analysts anticipate that Trump’s return to the White House may reintroduce market volatility.
US markets were closed on Monday due to the Martin Luther King Jr. Day holiday. Trump’s threats regarding tariffs negatively affected the Mexican peso, which declined 1.1% against the US dollar, and the Canadian dollar, which fell 0.9%. Both currencies had previously strengthened after Trump suggested he would delay any immediate tariffs on key partners to assess the trade situation.
Eric Winograd, an economist at AllianceBernstein, expressed that such volatility “is the new normal,” with the Trump administration’s policies likely to be less predictable than those observed under the Biden administration.
In European markets, Trump threatened the EU with tariffs if it did not purchase more US oil, stating, “They don’t take our cars… So we’ll figure that out with either tariffs or they have to buy our oil.” This announcement contributed to the euro’s decline by about 0.5% against the US dollar.
Bitcoin prices experienced fluctuations, briefly reaching $109,241 on inauguration day before falling 0.9% to trade at $101,666 due to the absence of any cryptocurrency policy mention in Trump’s address.
Asian traders showed relief as Trump refrained from enacting immediate trade restrictions against China, although he warned that such actions could be considered if Beijing did not grant the US partial control over TikTok. The CSI 300 index was flat, and Hong Kong’s Hang Seng rose by 0.9% during Tuesday’s trading.
The offshore renminbi strengthened to a six-week high of 7.25 against the dollar before weakening to 7.28. Jason Lui, head of APAC equity and derivative strategy at BNP Paribas, assessed that avoiding “the worst-case scenario from a risk-asset perspective” was beneficial, given that there were no new tariffs on China on the first day.
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