Trump’s new tariffs bring market jitters

European and Asian stocks fell and China’s currency slid to a four-month low against the dollar after Donald Trump threatened tariffs on Canada and Mexico and fresh ones for China in an opening salvo against America’s trading partners.
The Stoxx Europe 600 index, the broadest measure of Europe’s equity prices, lost 31 points, or 0.66 per cent, at the start of trading on Tuesday as investors sold non-US stocks.
Asian equities also slipped, with Japan’s Nikkei and South Korea’s Kopsi down 0.8 per cent and 0.6 per cent respectively. China’s yuan, which moves within a fixed band set by the Communist Party, fell against the dollar to the lowest level since July 30.
Europe and Asia’s industrial economies are in the firing line of Trump’s plans for escalating tariffs on countries who run a trade surplus with the US.
On Monday night, the president-elect said he would impose a 25 per cent import tax on all goods from Mexico and Canada in an executive order to be made on January 20. In a post on Truth Social, Trump accused America’s neighbours of having an open border policy that has allowed drugs and “illegal aliens” to enter the US in an “invasion of our country”.
Trump said he would also raise existing tariffs on China by an additional 10 per cent.
The FTSE 100 opened 0.4 per cent lower, with the drinks giant Diageo the biggest loser, down 2.3 per cent, over worries that the industry will be the target of fresh US import levies. Trump has said he will impose a blanket 10-20 per cent tariff on all American trading partners, including the UK.
The dollar, which has been the beneficiary of Trump’s aggressive tariff promises, rose marginally against a basket of major currencies by 0.2 per cent. The pound and the euro were both stable against the dollar, while Mexico’s peso weakened by 1.2 per cent and Canada’s dollar touched a four-year low against the US dollar before strengthening.
“Foreign exchange is the pressure valve through which global markets are responding to the announcement by president-elect Trump,” Kenneth Broux, at Société Générale, said. “The Canadian dollar and Mexican peso are roiled by the announcement given the dominance of exports to the US, close to 83 per cent and 75 per cent respectively, according to the latest trade statistics.”
The European carmaker Stellantis, which produces Vauxhall, Peugeot, Jeep and Fiat cars, was the biggest faller in Europe, losing 4.5 per cent in morning trading. Auto manufacturers are likely to be hit by measures that threaten the production of cars for the North American market assembled in Mexico.
“[European] policymakers will remain fearful that it will just be a matter of time before Trump turns his attention to the European auto sector or tariffs more broadly,” Chris Turner, analyst at ING, said.
Gold also traded lower after a 3 per cent slump on Monday, losing its safe haven appeal as investors buy up riskier assets like US stocks on the back of Trump’s economic policy of tax cuts and tariffs.
The president-elect announced Scott Bessent, a hedge fund manager, as his new Treasury secretary in charge of macroeconomic policy, triggering a rally in US bonds and equities at the start of the week.