ISLAMABAD: Asian stock markets saw steep declines on Monday, mirroring the sharp drop in US equity futures, following US President Donald Trump’s announcement of new tariffs on Canada, Mexico, and China. The move has intensified fears of a looming global trade war, raising concerns over its potential impact on worldwide economic growth.
Trump’s tariffs, including a 25% duty on Canadian and Mexican goods and a 10% levy on Chinese imports, are set to take effect at 12:01 a.m. ET (0501 GMT) on Tuesday. The president has justified the measures as necessary to address the influx of migrants and fentanyl into the United States. Both Canada and Mexico have pledged to retaliate, while China plans to challenge the tariffs at the World Trade Organization.
The imposition of the tariffs sent shockwaves through financial markets. Japan’s Nikkei share average plunged as much as 2.3% in early trading, while Australia’s benchmark, often seen as a proxy for Chinese markets, fell over 2%. In Hong Kong, stocks dropped 1.9% after the Lunar New Year holiday, while Europe also faced significant losses, with the pan-European STOXX 50 futures falling 2.7%.
The US dollar surged to a record high against the Chinese yuan in offshore trading, reaching 7.3765 yuan, its strongest level since the yuan’s inception. It also climbed to its highest levels against the Canadian dollar since 2003 and against the Mexican peso since 2022. The euro, meanwhile, dropped to a low of $1.0125, its weakest level since November 2022, amid concerns that the EU might be next in line for tariffs.
Economists have warned that Trump’s tariff measures could lead to a sharp rise in US inflation, potentially slowing domestic economic growth. Capital Economics’ Paul Ashworth estimated that the tariffs could reduce US GDP growth by 1.5 percentage points this year, while triggering recessions in both Canada and Mexico. Meanwhile, Barclays strategists project a potential 2.8% decline in S&P 500 company earnings as a result of retaliatory actions from affected nations.
The tariffs have also pushed bond yields higher, with US two-year Treasury yields rising to 4.274%, the highest in a week, as traders bet on higher inflation and delayed interest rate cuts. Similarly, yields on Japanese government bonds hit their highest levels since October 2008.
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In commodity markets, oil prices saw gains, with US West Texas Intermediate crude rising by 1.8% to $73.81 per barrel, and Brent crude futures increasing by 0.7% to $76.20 per barrel. Bitcoin also took a hit, falling to a three-week low of $92,997.86.
With China’s markets set to resume trading on Wednesday, global investors are bracing for further market volatility amid mounting uncertainty over the future of global trade relations.
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