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The U.S. dollar strengthened on Tuesday after President Donald Trump pledged to impose additional tariffs on imports from Canada, Mexico and China, reigniting concerns about his trade policies.
The dollar index, which tracks a basket of currencies including the pound and the Japanese yen, rose 0.4% on Tuesday morning. The Mexican peso fell 1.3% against the dollar, the biggest decline of any major currency, while the Canadian dollar fell 0.8%.
After President Trump nominated hedge fund manager Scott Bessent to be Treasury secretary, investors took the appointment as a sign that the president-elect’s policies could be loosened. The dollar index fell about 0.6% on Monday.
But Jason Lui, head of Asia-Pacific equities and derivatives strategy at BNP Paribas, said Trump’s announcement showed he was willing to move quickly to impose tariffs on China and other countries.
The president-elect announced a 10% tariff on China and a 25% tariff on “all products” from Mexico and Canada.
The market view on Monday was that Scott Bessent’s nomination was certain. [was of] Someone who understands the market and can mitigate some of the more extreme policy scenarios,” Lui said.
“However, including Canada and Mexico on day one could open the door to accelerating additional tariffs on other trading partners,” he added.
The yield on the 10-year US Treasury note rose 0.03 percentage point to 4.29%. Yields move inversely with prices.
Economists at Standard Chartered estimated that a 1 percentage point increase in U.S. tariffs on China reduced China’s exports to the United States by 1.5 percentage points during President Trump’s previous term.
“If an additional 10% tariff were imposed on all imports from China, China’s exports to the US would decline by about 15% over the next 12 months, and China’s GDP growth would peak at about 0.4-0.5%. ”, wrote Hunter Chan, a Greater China economist at the bank.
Chinese stocks were flat on the news of tariffs, while the yuan fell 0.1% against the dollar. In afternoon trading in Asian markets, the Hang Seng China Enterprise Index of Chinese companies listed in Hong Kong was flat, while the mainland’s CSI300 index of companies listed in Shanghai and Shenzhen rose slightly by less than 0.1%. It became.
Brian Arcees, portfolio manager at Singapore’s Food Asset Management, said there was an element of “relief” in the Chinese market following the announcement as the tariffs were smaller than some had expected.
“[It] This primarily depends on the proposed tariff being 10 percent instead of 60 percent. . . However, I would not be surprised if these numbers change over time,” he said.
Stock markets in the rest of Asia fell. Although President Trump’s posts on the social media site “Truth Social” did not mention other countries, Japan’s Nikkei Stock Average, which has a lot of exports, fell 1.3% led by semiconductor stocks, and Taiwan’s ThaiEx fell 1.2%. .
