Stock markets across Asia and Europe tumbled on Monday after Donald Trump imposed tariffs on Canada, Mexico, and China, fueling concerns of a renewed “America First” trade war that could slow global economic growth.
US stock futures signaled a significant selloff ahead of the market opening. “Trade war 2.0 begins,” UBS strategists noted in a report Monday.
Japan’s Nikkei index closed down 2.7%, while South Korea’s KOSPI dropped 2.5% by the end of the trading session. Hong Kong’s Hang Seng remained mostly unchanged.
China’s Shanghai index was closed for the Lunar New Year holiday and will resume trading on Wednesday. On Sunday evening, Trump also warned of potential additional tariffs on the European Union, claiming the EU was “really out of line.”
Europe’s Stoxx Europe 600 benchmark index was down 1.4% in early trading Monday. Germany’s DAX and France’s CAC both fell 1.9%, while London’s FTSE 100 dropped 1.3%.
Trump’s Trade War (Photo: Getty Images)“Tariffs and counter-tariffs will be inflationary and weaken growth prospects, both of which are negative for equities,” said Mohit Kumar, an economist at Jefferies.
The US dollar surged to a record high against the Chinese yuan. “For now, it appears the dollar is the only winner,” said Chris Beauchamp, chief market analyst at IG, an online trading platform.
Over the weekend, Trump announced a 25% tariff on all imports from Mexico and most goods from Canada, along with an additional 10% duty on Chinese imports to the US.
Trump has justified the tariffs as a necessary measure to combat illegal immigration and fentanyl trafficking into the United States. The new levies are expected to take effect on Tuesday.
In response, Canada and Mexico have announced retaliatory tariffs, while China has vowed to challenge the move at the World Trade Organization.
