U.S. Dollar Surges as Trump Announces New Tariffs on Imports
The financial and commodity markets moved significantly on Tuesday in relation to President-elect Donald Trump’s imposition of taxes on imports from Canada, Mexico, and China. This created a rise in the U.S. dollar and a sharp decline in European stocks, particularly auto-making firms.
European equities drop further as tariff fears intensify
European markets appeared less thrilled, especially the STOXX 600, which declined by 0.7% in the initial hours of the market. Car manufacturers were hit hardest in the sell-off, with Volkswagen and Stellantis both down between 2.6% and 5%. Such losses were said to have resulted from the fear of the US tariffs extending to goods from the European Union.
Industry analysts pointed out that concerns over the expansion of trade barriers impacted the investors’ attitude. ‘The equity reaction, especially in Europe, is due to hedging against possible additional trade measures against the EU,’ Market strategist at Pepperstone, Michael Brown, said.
US markets were also volatile, with S&P 500 futures lowering by 0.1% but up 0.3% the previous day. The selection of Scott Bessent as Treasury Secretary proved optimistic, but it was only marked by trade-related risks.
Dollar Rises While Trade-Related Currencies Drop
The US dollar reached its intraday high against multiple currencies; versus the Mexican peso at 20.75, it advanced by as much as 2.3% before it closed 1.7% higher on the day. It also increased by 1% relative to the Canadian dollar, reaching C$1.4139. The dollar was 0.1% higher against the euro at $1.04838 and 0.2% higher against the pound sterling at $1.2548.
Trump’s approval included 25% tariffs on goods produced in Mexico and Canada and 10% tariffs on goods from China. Markets saw these measures as part of Trump’s protectionist policy, which he has been promoting for years. Currency experts expected the trend to persist regarding trade-sensitive currencies such as the peso and the Canadian dollar.
On the same note, the yen was slightly up 153.66 to the dollar. This occurred as U.S. Treasury yields rose further, with the 10-year yield rising by 3.7 bp to 4.3% in the European trading session.
Commodity markets consider the experience.
In commodities, Bitcoin fell 1% to $92,781, still lower than the record high of $99,830 reached last week. Still, the token reacts to regulatory signs; meanwhile, there are discussions on anti-cryptocurrency measures under the new president.
Spot gold fell to a one-week low of $2,604.99 due to a strong dollar, and commodities, in general, bear the brunt of it. Base oil prices slightly rebounded: Brent crude futures were at $73.41 per barrel, up by 0.6%, and WTI was at $69.25 per barrel, up 0.45%. Shareholders deliberated on the consequence of a cease-fire in the Middle East.
