Financial markets swayed after Donald Trump took office and did not immediately impose new trade tariffs in his executive orders, but later signalled punitive tariffs on Mexico and Canada.
The US president told reporters in the White House’s Oval Office he was thinking about introducing 25% US tariffs on imports from Mexico and Canada as soon as 1 February.
The US dollar, which had initially fallen in the hours after Trump took office, reversed course after the comments to hit five-year highs against the Canadian dollar, and rose by 1% against the Mexican peso.
Financial markets, which rallied in the aftermath of Trump’s election victory in November, were largely calm in reaction to his return to the White House. US markets were closed for Martin Luther King Jr Day on Monday, so Asian markets were the first to respond. Japan’s Nikkei index swung between losses and gains and ended the day 0.3% higher.
Other Asian markets also made modest gains, with Hong Kong’s Hang Seng climbing by nearly 1% and China’s Shenzhen market rising by 0.5%, while the Shanghai and South Korean exchanges were slightly in the red and the Indian market lost nearly 0.6%.
In Europe, the UK’s FTSE 100 index edged just four points higher to 8,524 by mid-morning. Germany’s Dax and Italy’s FTSE MIB slipped slightly, while France’s CAC rose by 0.25%. The pound and the euro lost about 0.6% against the dollar. Sterling had risen by 1.3% on Monday, its biggest daily jump since November 2023.
US stock futures pointed to modest gains on Wall Street when markets open for trading at 2.30pm GMT.
Oil prices tumbled, with Brent crude losing more than $1 a barrel to fall to $79.10 a barrel, while West Texas Intermediate fell by $1.73 a barrel to $76.15 a barrel. Gold – seen as a safe haven asset – was back in favour, hitting a two-month high amid uncertainty over US tariffs.
“Once again, Trump appears to care little for who are perceived to be allies or foes, with Canadian and Mexican currencies hit hard … So much for the plan to raise tariffs by 2% a month,” said Joshua Mahony, an analyst at Scope Markets.
“However, the Chinese markets clearly felt more optimistic, with Trump’s decision to reinstate TikTok followed up by a lack of any mention around tariffs on Chinese imports. For now anyway.”
Investors are also keeping an eye on the World Economic Forum in the Swiss ski resort of Davos, where the world’s political and business leaders are gathered for their annual meeting. They include Ding Xuexiang, the vice-premier of China, where there may be relief that Trump has not fleshed out his plans for taxing Chinese imports.
On Monday, Trump said he wanted to reverse the US trade deficit with the EU through tariffs or more US energy exports.
European natural gas prices fluctuated, after he lifted a moratorium on new export licences, easing uncertainty over longer-term global supply. Dutch month-ahead futures, Europe’s gas benchmark, traded 0.3% higher at €48 a megawatt-hour in Amsterdam.
The US president also repeated a call for the EU to buy more American oil and gas if the bloc wants to avoid tariffs. The US is already Europe’s biggest supplier of liquefied natural gas.
“More oil production, no indication of crypto mining, punitive tariffs against Mexico and Canada: these are the three key points for investors from Trump’s inaugural address,” said Jochen Stanzl, the chief market analyst at CMC Markets. Brent crude futures were flat at $80.1 a barrel.
“We can only hope that Trump will spare the EU and Germany from punitive tariffs until after the German parliamentary elections, as the outgoing government will hardly be in a position to react to changes in trade relations with the US. However, this reprieve should not be taken as permanent. Sooner or later, Trump will also target Germany.”
Bitcoin, which rose by 4% on Monday to reach a fresh record high above $109,000 on hopes of a crypto-friendly administration, has retreated since then.
Stanzl said: “There were probably one or two investors who had hoped for more. It seems that Trump is prioritising issues other than supporting the crypto industry. But one thing is clear: a positive word from Trump and bitcoin could rise significantly again. Investors are just waiting for it.”
