Stock markets cautious as Trump announces new tariffs

Asian stock markets posted modest gains Tuesday after President Donald Trump said he was considering imposing new tariffs on Mexico, Canada and China.

Stocks were flat or slightly higher after Trump pledged in his inaugural speech to bring a “golden age” for America and did not announce new import taxes on his first day in office. Stocks in Europe were little changed.

He promised an ambitious agenda – including trade reforms, lower taxes and reductions in government regulations – that could potentially boost corporate profits.

But some economists have warned that these measures could also increase inflation, which could force the Federal Reserve to raise interest rates.

“We’re looking at a 25% reduction for Mexico and Canada because they’re allowing a lot of people in, Canada being a very bad consumer as well, a lot of people in, as well as fentanyl,” said Trump. the Oval Office.

In a presidential memo, he asked federal agencies to investigate why America continues to import more goods than it exports, as well as investigate possible unfair trade practices and on alleged currency manipulations by other countries.

Trump also said new tariffs on China could depend on reaching a deal on TikTok’s future. If Beijing blocked such a deal, “it would be somewhat of a hostile act,” he said.

But he added that the United States is not yet ready to impose tariffs on all imports into the country.

On the campaign trail, Trump promised a universal 10% tariff and said he would impose a 60% import tax on China.

He has said the tariffs would make Americans richer, although critics say the costs will likely be passed on to consumers.

The president also announced that he would create a “Foreign Revenue Service” to collect all customs duties, taxes and revenues from foreign sources.

On Tuesday, Hong Kong’s Hang Seng was up 0.9%, South Korea’s Kospi was flat on the day, Japan’s Nikkei 225 finished up 0.3% and the ASX 200 was Australia closed up 0.6%.

At the same time, the dollar has regained ground against some other major currencies, including the pound sterling and the euro.

Any reaction to Trump’s inauguration from U.S. stock markets will come Tuesday after they close Monday for the Martin Luther King Jr. national holiday, said Fiona Cincotta, senior market analyst at City Index.

In foreign exchange markets, “plans and discussions about levies on Canada and Mexico have led to a sharp fall in those currencies,” she told the BBC’s Today programme.

The euro and sterling were also down, she added.

Oil fell on the prospect of increased supply, and Bitcoin rose on Trump’s promises of support for cryptocurrencies.

Tim Waterer, chief market analyst at financial services firm KCM Trade, said “market sentiment was shaken as President Trump signed the executive orders in the Oval Office.”

“Investors heard more graphic details regarding Trump’s tariff agenda, which dampened market sentiment somewhat.”

Other analysts have warned that Trump’s return to the White House would reintroduce an element of unpredictability into markets.

“The early hours of the Trump administration have highlighted that the political environment will once again be dynamic and markets should prepare for volatility,” said Charu Chanana, chief investment strategist at investment bank Saxo.

Trump adviser Judy Shelton said Trump’s “top priority is reinvigorating the private sector.”

He wants to “liberate the individual through more economic freedom, through lower taxes and less regulation,” she said.

She said the tariffs were “a very effective negotiating tool” and would be used “with our closest neighbors and largest trading partners, Mexico and Canada” on immigration.

She added that the tariffs would not necessarily be inflationary for Americans: people might not pay higher prices for imported goods and would instead turn to American producers.