Donald Trump has threatened to widen the scope of his trade tariffs, repeating his warning that the EU – and potentially the UK – will face levies, even as he conceded that Americans could bear some of the economic brunt of a nascent global trade war.
It comes as Trump’s 25% tariffs on Mexico and Canada, and 10% levies on China, announced on Saturday, prompted retaliation from all three countries.
While Trump said new tariffs on the EU will “definitely happen”, he appeared to take a softer line on the UK, citing a good relationship with prime minister Keir Starmer while saying tariffs still “might happen”.
Trump acknowledged the tariffs may cause “short term” pain for Americans as global markets reflected fears the levies could undermine growth and reignite inflation. “We may have short-term some little pain, and people understand that,” he said. “But long term, the US has been ripped off by virtually every country in the world.”
Here’s a summary of the latest market moves:
• Stocks in Hong Kong, fell nearly 2% while China’s markets remained closed
• Japan’s Nikkei share average tumbled up to 2.3%; South Korea’s Kospi fell 2.4%.
• Taiwan’s Taiex fell 4.4% at the open, with a 6% plunge in semiconductor TSMC.
• In the US, S&P 500 futures slid 1.6% and Nasdaq futures slumped 2.2%.
• European futures fell as much as 3.4%.
• The US dollar shot to a record high of 7.3765 against the yuan in offshore trading, its highest against the Canadian dollar since 2003, and the strongest against the Mexican peso since 2022.
• The euro fell by as much as 2.3%.
• Canada's dollar hits 20-year low, amid a general surge in demand for the US dollar.
• Bitcoin was down 6% to about $93,000.
• The pound is also suffering. Sterling has dropped by a cent, or 0.9%, against the dollar to as low as $1.2246, its weakest level in almost two weeks.
Bloomberg has characterised the rapid escalation in trade tensions as “the most extensive act of protectionism taken by a US president in almost a century, given its knock-on effect on everything from inflation to geopolitics and economic growth.”
Steven Englander, global head of G-10 FX research at Standard Chartered plc, told Bloomberg on Monday: “He seems to be like a poker player who’s betting his whole stash on the first hand The market just wasn’t prepared for it.”
A Wall Street Journal editorial branded Trump's tariffs the ‘dumbest trade war in history’.
In Canada, the department of finance has published a list of US products imported into Canada that it will target with a 25% retaliatory tariff starting on Tuesday.The goods include tobacco, produce, household appliances, firearms and military gear. Canada is also preparing for a second, broader round of retaliatory tariffs and would include passenger vehicles, trucks, steel and aluminium products, certain fruits and vegetables, beef, pork, dairy products and more.
The odds of the Bank of England cutting interest rates several times this year are rising, amid fears of global trade conflict. The money markets are now pricing in 80 basis points, or 0.8 percentage points, or cuts to Bank Rate by the end of this year. That means three quarter-point cuts are fully priced in with the possibility of a fourth. The Bank is due to set interest rates at noon on Thursday, and a quarter-point cut – from 4.75% to 4.5% – is a 98% chance, according to this morning’s pricing.
The agenda
• 9am GMT: Eurozone manufacturing PMI for January
• 9.30am GMT: UK manufacturing PMI for January
• 10am GMT: Eurozone inflation report for January
• 3pm GMT: US manufacturing PMI for January
We'll be tracking all the main events throughout the day … |
