Markets slide as Trump confirms tariffs on Canada, Mexico and China
Global stock markets slumped following Trump’s announcement that he would proceed with 25% tariffs on Canada and Mexico, alongside additional 10% levies on Chinese imports.
The three countries responded with retaliatory measures, increasing fears of an escalating global trade war.
Responses from Canada and China
Canadian Prime Minister Justin Trudeau announced that Canada will impose 25% tariffs on C$155 billion (€102.1 billion) worth of US goods, with tariffs on C$30 billion (€19.8 billion) of imports coming into effect on Tuesday and the remainder in 21 days.
“Our tariffs will remain in place until the US trade action is withdrawn, and should US tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,” Trudeau said in a statement.
China, meanwhile, signalled that it would impose additional tariffs of up to 15% on imports of key US farm products, including chicken, pork, soy and beef, and would further restrict business with US companies.
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China’s Ministry of Commerce had released an earlier statement saying that Beijing was “strongly dissatisfied” with US tariffs and would “take countermeasures to safeguard its rights and interests".
In February, China already imposed a 15% levy on coal and liquified natural gas (LNG) from the US and a 10% duty on American crude oil, farm equipment, and certain vehicles, following the Trump Administration’s initial 10% duty on China’s imports.
Last month, Trump also signed a memorandum directing the Committee on Foreign Investment to curb Chinese investment in the US.
On Tuesday, Mexico's President Claudia Sheinbaum said she would announce Mexico's retaliatory tariffs against the US on Sunday.
The leader reiterated that Mexico would cooperate with the US but not be subordinate.
European markets surge
Risk-aversion sentiment dominated global market trends, sending US stock markets sharply lower.
The tech-heavy index Nasdaq slumped 2.6%, erasing all the gains since Trump’s victory in the election.
The US dollar weakened against most other major currencies due to a slump in the US government bond yields.
However, the Canadian dollar and the Mexican Peso declined sharply against the greenback.
US government bonds, or Treasuries, are considered safe-haven assets and bond prices move inversely with bond yields. Other haven assets, including gold and the Japanese Yen, have all experienced strong gains.
In contrast to declines in US stock markets, European equities continued their record-breaking rally, with both the Euro Stoxx 600 index and Germany’s DAX hitting new highs on Monday.
Defence stocks soared, boosting the industrial sector in the bloc. Shares in Rheinmetall AG surged 13.7%, Airbus rose 5.9%, and BYYER AG climbed 5.7% after UK Prime Minister Keir Starmer met Ukrainian President Volodymyr Zelenskyy in London.
Starmer pledged to work with Ukraine on a strategy to end the war, increasing the likelihood of higher military spending in Europe.
European indexes such as the Stoxx 600, the DAX, and the CAC 40 nonetheless showed marginal declines on Tuesday morning.
Rise for the euro and bond yields
The euro, meanwhile, strengthened at the start of the week as most European government bond yields rose following hotter-than-expected February inflation data, complicating the European Central Bank’s (ECB) outlook on aggressive rate cuts.
On Monday, Germany’s 10-year Bund yield climbed 10 basis points, contrasting with a 9 bps drop in the 10-year US Treasuries. EUR/USD surged by nearly 1 cent, surpassing 1.0480.
Bitcoin retreated to just under $84,000 (€80,100) at 07:20 CET on Tuesday from Monday’s high above $94,000 (€89,600), mirroring the broad sell-off in technology shares.
The world’s largest digital token experienced a short-lived surge after Trump posted on Truth Social that he would “move forward on a Crypto Strategic Reserve” and “make sure the US is the Crypto Capital of the World”.