(Bloomberg) — The dollar strengthened and shares dropped after President-elect Donald Trump said the US will impose additional tariffs on China, Mexico and Canada, ratcheting up concerns about his “America First” policies.
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Asia’s benchmark equity gauge slipped as much as 1% and European futures pointed to a weak open after Trump vowed to place an extra 10% tariffs on Chinese imports and 25% levies on all products from Mexico and Canada. The measures are needed to clamp down on migrants and illegal drugs flowing across the US border, he said on his Truth Social Network.
The Bloomberg Dollar Spot Index surged as much as 0.7% before paring gains, while China’s offshore yuan weakened 0.4%, and the Mexican peso and Canadian dollar both tumbled more than 1%. US stock futures slipped before erasing declines.
“The incoming president has started early but this could be a surprise only to those who have forgotten 2016-to-2020,” said Kieran Calder, head of equity research for Asia at Union Bancaire Privee in Singapore. “This is President Trump’s negotiating style: step one, punch in the face, step two, let’s negotiate.”
The Canadian dollar fell to a four-year low on the news, while the Mexican peso traded close to its weakest since 2022. Commodity currencies such as the Australian and New Zealand dollars dropped.
“Trump’s threat of even more tariffs will give another leg up to the US dollar,” said Carol Kong, a strategist at Commonwealth Bank of Australia in Sydney. “Aussie and kiwi will be dragged down because of their links to the Chinese economy.”
China’s benchmark stock index swung between gains and losses, outperforming most of its regional peers.
“Markets have been expecting tariffs, but the magnitude is the key,” said Ken Wong, Asian equity portfolio specialist at Eastspring Investments. “At the moment, anything less than the 60% tariff rate should be seen as a positive.”
The CSI 300 Index may have been supported by dip buying after a two-day decline, and also by expectations Beijing will step up fiscal easing to support economic growth in the face of rising geopolitical tensions.
China’s central bank set its daily fixing for the yuan at a one-week high, pushing back against the dollar rally. The People’s Bank of China has consistently set its daily reference rate stronger than 7.2 per dollar since the US election, despite rising volatility in the greenback.
