Global markets were volatile on Tuesday, and the dollar rebounded in choppy trading as Donald Trump returned to the White House. President Trump did not immediately impose tariffs on Monday as previously promised but said he was thinking about imposing 25% duties on imports from Canada and Mexico on Feb. 1 over illegal immigrants and fentanyl crossing into the U.S. While the Mexican peso and Canadian dollar fell against the greenback, European shares dipped in early trade and U.S. stock futures were firmer.
Comments From Investors and Analysts
HELEN GIVEN, FX TRADER, MONEX USA, WASHINGTON
“Volatility is clearly back in a big way, and after the relatively calm term of Joe Biden, FX markets are on a hair trigger for any tariff talk from the Trump administration. Trump’s proposed tariffs, though, are right now still just that—proposals. Traders are trying to get ahead of the risk of tariffs on Mexico and Canada, but until such actions materialize trying to hedge around them is going to keep markets very choppy, and we’ve seen that price action today.”
WALTER TODD, CHIEF INVESTMENT OFFICER, GREENWOOD CAPITAL, GREENWOOD, SOUTH CAROLINA
“If there’s one kind of ‘surprise,’ it was the lack of specificity or any type of specificity on tariffs.”
“I think there was an expectation that he was just going to do an executive order and hit it hard and he didn’t. And so you’re seeing rates down, you’re seeing the dollar down, I think as a function of that.”
MARK HAEFELE, CHIEF INVESTMENT OFFICER, UBS GLOBAL WEALTH MANAGEMENT
“Our base case for the U.S. economy is for ‘growth despite tariffs.’ While we will be closely monitoring for risks, we do not believe that the tariff measures outlined in our base case would be sufficient to derail U.S. growth. Nor do we believe that such tariffs would preclude inflation continuing to fall from current levels, enabling the Fed to cut rates by 50 bps later this year.”
CHARLES WANG, CHAIRMAN OF SHENZHEN DRAGON PACIFIC CAPITAL MANAGEMENT CO, SHENZHEN:
“You don’t expect Trump’s inauguration to trigger a big rally, as it’s unrealistic for Sino-U.S. ties to suddenly reverse … and you don’t read too much into the words of Trump, who is very fickle.”
KIYONG SEONG, LEAD ASIA MACRO STRATEGIST, SOCIETE GENERALE, HONG KONG
“While there was no immediate tariff imposed on China, providing some relief to the market, President Trump has initiated tariffs on Canada and Mexico. It is unlikely that he will alter his plan regarding tariffs on China.”
“A potential delay in the imposition of tariffs on China could also lead Chinese authorities to abstain from implementing a definitive stimulus. In such a scenario, renewed market skepticism about China’s growth recovery may overshadow the tariff narrative, as an inadequate stimulus to bolster domestic consumption would underscore the growth disparity between China and the U.S.”
SHOKI OMORI, CHIEF GLOBAL DESK STRATEGIST, MIZUHO SECURITIES, TOKYO
“Twenty-five percent looks high as a starter, and markets reacted quickly, especially in FX. I think market participants thought Trump would start with China, with say a 10%-20% tariff on goods but gradual increase.”
“USDCNH (dollar/Chinese yuan) cheapening is temporary, I doubt it will continue. USDCNH is set to go lower with the Trump administration coming up with tariffs.”
CHARU CHANANA, CHIEF INVESTMENT STRATEGIST, SAXO, SINGAPORE
“The first few hours of Trump administration has underscored that policy environment will be dynamic once again and markets should brace for volatility. Clearly, the markets celebrated too soon with tariff threats missing at the outset in Trump’s inaugural speech.”
“However, the respite was short-lived and latest announcement on Canada and Mexico tariffs likely to be enacted Feb 1 reaffirmed that the tariff threat was only delayed and not averted. Still, the absence of any threats on China has kept the hopes of a negotiation alive there, especially after the Trump-Xi phone call last week as well.”