Stocks fall, dollar surges: How markets react to Trump's new tariffs
Date: 2025-02-03 Author: Кирило Загоруйко Categories: ECONOMY
US President Donald Trump's tariffs have swept across currency markets. The Canadian dollar and Mexican peso suffered losses as investors rushed to assess how the new tariffs will affect Washington's biggest trading partners.
The Financial Times reports that the Canadian dollar came under pressure early in Asia-Pacific trading, falling 1.4% to C$1.473 against the US dollar, its lowest since 2003. The Mexican peso fell more than 2% to C$21.15 against the dollar. The euro also lost 1%.
Trading volumes are typically very light at the start of the session, which can exacerbate price swings.
The sharp drop came after Trump imposed tariffs on all imports from Mexico and Canada, Canadian energy and imports from China on Feb. 1.
Economists warn that the new tariffs will likely accelerate inflation in the U.S., which has pushed up Treasury yields and the dollar since Trump's election in November 2024.
"The most obvious consequence is a stronger dollar," said Eric Winograd, chief economist at Alliance Bernstein.
He said "there's every reason to think that the stock market will take a little bit of a hit."
"If the tariffs are in place for several months, the exchange rate will reach new all-time highs," said Gabriela Siller, chief economist at Mexico's Banco Base, referring to the peso against the dollar. "If the tariffs are in place, it will be a structural change for Mexico ... and Mexico could fall into a deep recession that will take years to recover from."
Bloomberg writes that the new U.S. tariffs could hit China's exports particularly hard and undermine its already fragile economy, which in turn would force Beijing to resort to more aggressive stimulus measures to counter the impact.
"From a macro perspective, we think the immediate impact on Asian equities could come from a potentially stronger U.S. dollar," Nomura Holdings Inc. strategists wrote in a note.
Japan's largest automakers count on North America as a key market, selling cars there that were made or assembled in Mexico, near the U.S. border. Shares of Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. fell at least 5%.
Shares of South Korean automaker Kia Corp., which has a plant in Mexico, fell more than 5%.
Chinese electric vehicle makers seeking to expand their presence in the U.S. market, such as Li Auto Inc. and XPeng Inc., were hit by the new tariffs. Their shares fell at least 6% in Hong Kong.
Shares of Chinese e-commerce platforms fell as Trump’s plans would end a long-standing tax exemption for packages under $800.
Shares of Chinese companies that make small durable goods also fell. Sportswear maker Li Ning Co. and home appliance maker Haier Smart Home Co. both fell more than 7%.
Shares of Asia’s largest chip exporters, including Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co., fell as Trump said he would tax chips.
Meanwhile, Japanese semiconductor equipment makers, which typically get the bulk of their revenue from China, also fell. Shares of Tokyo Electron Ltd., Advantest Corp. and Disco Corp. all fell at least 2%.
Asian refiners could be the big winners from the U.S. tariffs, analysts say, with S-Oil Corp. and others in the sector outperforming the broader market. Trump’s tariffs on Canadian and Mexican crude imports could give Asian refiners an edge over their U.S. rivals, while their profit margins could widen thanks to higher product prices.
Some Taiwanese companies making artificial intelligence equipment in Mexico fell, with Quanta Computer Inc. shares falling nearly 10%. Shares of Delta Electronics Inc., which has investments in Mexico, fell.
Other non-automotive manufacturers in the region with factories in Mexico, such as LG Electronics Inc., also fell.
Shares of Indian generic drugmakers and auto parts suppliers with a presence in Mexico, such as Samvardhana Motherson International Ltd., Tata Motors Ltd. and Lupin Ltd., fell.
