President Donald Trump’s new tariffs on imports from Canada, Mexico, and China have sparked fears of an escalating global trade war, causing Asian stock markets to tumble in early Monday trading. Taiwan’s Taiex fell 4.4% at the open, led by a more than 6% plunge in semiconductor heavyweight TSMC. Japan’s Topix index was down as much as 2.3% and Korea’s Kospi fell as much as 2.4%, led by major exporters with exposure to global markets, including electronics manufacturers Samsung and LG, and automaker Kia.
China’s markets remain closed for the lunar new year holidays. Australia’s benchmark ASX 200 opened down more than 2%, retreating from a fresh record high reached on Friday. Iron ore miners, including BHP and Rio Tinto, followed the price of the commodity lower.
Hong Kong’s Hang Seng index opened down 0.9%. European futures were also down sharply, as much as 3.4%, after President Trump indicated at a press conference that European Union member countries would be next in the firing line. “It will definitely happen with the European Union, I can tell you that,” Trump said when asked by reporters about targeting tariffs at other countries.
Trump’s tariffs unsettle global markets
The US dollar shot to a record high against the Chinese yuan in offshore trading, and jumped to the highest since 2003 against Canada’s currency and the strongest since 2022 versus Mexico’s peso. Trump followed through on his promise to place 25% tariffs on Canada and Mexico – except for Canadian energy, which will attract a 10% tariff – as well as 10% tariffs on several other goods, in retaliation over immigration and illegal drugs that he says enter the US from these countries.
The White House said the tariffs would go into effect on Tuesday. Canada’s department of finance announced it will target US products imported into Canada with a 25% retaliatory tariff, also starting on Tuesday. Claudia Sheinbaum, Mexico’s president, has vowed to implement retaliatory tariffs but also said her government was working on a “plan B” as she insisted that Mexico “doesn’t want confrontation.” China said it would file a lawsuit against the tariffs, stating they “seriously violate” World Trade Organization rules.
“These tariffs could usher in a destructive global trade war and drive a surge in US inflation that would come even faster and be larger than we initially expected,” said Paul Ashworth of Capital Economics. Barclays strategists previously estimated that the US tariffs could create a 2.8% drag on S&P 500 company earnings, including the projected fallout from retaliatory measures from the targeted countries. “During Trump’s first term in office, tariffs and trade tensions brought attention to the more general topic of the advantages but also disadvantages of globalisation,” said ING analysts led by Inga Fechner.
“This time around, it is hard to see how an escalation of trade tensions can do any good, for anyone.”
