Asian sharemarkets tumbled in early trade on Monday after the Trump administration’s imposition of tariffs on Mexico, Canada and China sparked fears of an escalating global trade war.
Taiwan’s Taiex fell 4.4% at the open, led by a more than 6% plunge in semiconductor heavyweight TSMC. Japan’s Topix index was down as much as 2.3% and Korea’s Kospi fell as much as 2.4%, led by major exporters with exposure to global markets, including Canada and Mexico such as electronics manufacturers Samsung and LG, and automaker Kia. China’s sharemarkets remain closed for the lunar new year holidays.
Australia’s benchmark ASX 200 opened down more than 2%, retreating from a fresh record high reached on Friday. Iron ore miners, including BHP and Rio Tinto, followed the price of the commodity lower. Hong Kong’s Hang Seng index opened down 0.9%.
European futures were also down sharply, as much as 3.4%, after Donald Trump indicated at a press conference that European Union member countries would be next in the firing line. The euro plunged as much as 2.3% to $1.0125.
“We’ll see what happens,” the US president replied when asked by reporters what countries would be next to be targeted by tariffs. “It will definitely happen with the European Union, I can tell you that.”
The US dollar shot to a record high against the Chinese yuan in offshore trading, and jumped to the highest since 2003 against Canada’s currency and the strongest since 2022 versus Mexico’s peso.
Trump on Saturday followed through with his promise to place 25% tariffs on Canada and Mexico – except for Canadian energy which will attract a 10% tariff – as well as 10% tariffs on China, in retaliation over immigrants and illegal drugs that he says enter the US from those countries. The White House said the tariffs would go into effect on Tuesday.
It has already sparked retaliation from all three targeted countries. Canada’s department of finance has published a list of US products imported into Canada that it will target with a 25% retaliatory tariff, also starting on Tuesday. Claudia Sheinbaum, Mexico’s president, has also vowed to implement retaliatory tariffs but also said her government was working on a “plan B” as she insisted that Mexico “doesn’t want confrontation”.
China said it would file a lawsuit against the tariffs. The imposition of tariffs by the US “seriously violates” World Trade Organization (WTO) rules, China’s commerce ministry said in a statement, urging the US to “engage in frank dialogue and strengthen cooperation”.
Trump’s move was the first strike in what could usher in a destructive global trade war and drive a surge in US inflation that would “come even faster and be larger than we initially expected”, said Paul Ashworth of Capital Economics.
Barclays strategists previously estimated that the US tariffs could create a 2.8% drag on S&P 500 company earnings, including the projected fallout from retaliatory measures from the targeted countries.
“During Trump’s first term in office, tariffs and trade tensions brought attention to the more general topic of the advantages but also disadvantages of globalisation,” said ING analysts led by Inga Fechner. “This time around, it is hard to see how an escalation of trade tensions can do any good, to anyone.”
Reuters contributed reporting
