Markets have been rocked this week as Donald Trump confirmed that previously-delayed tariffs on Canada and Mexico, and additional tariffs on Chinese goods have gone ahead as planned.
Some had hoped that another eleventh-hour U-turn might prevent them from coming in, but with the tariffs now implemented, both the dollar and stock markets are falling. The weaker dollar has pushed gold up more than 1% in the past 24 hours, passing $2,900 per ounce once more after last week’s dip, but volatility remains as markets weigh up what impact the tariffs will have on the US.
China, Canada and Mexico have all promised retaliatory tariffs to be introduced against US goods, and fears over the growing trade war has seen the US dollar index fall to it’s lowest in three months. Although the tariffs are expected to cause prices to rise, markets are concerned that growth could also slow, with some even fearing a recession in the worst case.
The Dow Jones has dropped more than 2% since the tariff announcement yesterday, while the NASDAQ is down 5.5% in the past five days. The S & P 500 is down 1.5% already in trading today, losing $3.3 trillion in value since February 19th. The STOXX Europe 600 index is also down 1.9% today alone as Europeans weigh up the risk that the EU will be the next target for Trump. After the President stated that tariffs on EU goods would be announced ‘very soon’, it seems Trump is happy to continue to move at a rapid pace.
The announcement that the President has also suspended US military aid to Ukraine has brought further geopolitical uncertainty. The US position on Ukraine has changed rapidly in the past few weeks, and has helped spur some further risk aversion in the market. Europe in particular now faces the threat of tariffs from the US and greater responsibility in the war against Russia.
Markets remain highly uncertain over the direction of travel for the year ahead, and indeed the remainder of President Trump’s full four-year term. His first few weeks have seen dramatic decisions on an almost daily basis, and price volatility is sure to continue while big changes to global trade are introduced.
