Stock markets sink, dollar rallies on Trump tariffs
AFP | London
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Stock markets tumbled while the dollar rallied and oil prices rose yesterday over concerns about the global economy after US President Donald Trump launched trade wars with Canada, China and Mexico.
Wall Street's three main indices fell sharply in early deals.
The London, Paris and Frankfurt stock markets were in the red in afternoon trading as Trump warned that the European Union would be next in the firing line and did not rule out tariffs on Britain.
Shares in European automakers were hit particularly hard, with Volkswagen shedding 5.7% and Jeep maker Stellantis down more than 6%. Asian stock markets finished mostly in the red.
"Investors fear that this trade war will result in a significant deterioration in the global economy," said John Plassard, investment specialist at Swiss asset manager Mirabaud.
There was also a sharp selloff across the cryptocurrency sector, with bitcoin slumping almost 5%.
Trump announced on Saturday 25% levies on imports from Canada and Mexico and 10% duties on Chinese goods.
The move "caught markets somewhat off guard, despite Trump's prior hints", said Daniela Sabin Hathorn, senior market analyst at brokerage Capital. com.
"The lack of a clear economic rationale behind this decision -- justified primarily as a measure to curb illegal immigration and fentanyl imports -- has unsettled investors," Sabin Hathorn said. Oil prices jumped as the US leader imposed tariffs of 10% on Canadian oil imports.
The US dollar gained against major currencies, with the Mexican peso and Canadian dollar slumping against the greenback.
Analysts warn that the tariffs could fuel inflation and drag down economic growth.
Trump admitted that Americans may feel economic "pain" from his tariffs, but that it would be "worth the price".
China, Mexico and Canada are the top three US trade partners and have all vowed to retaliate when the tariffs take effect Tuesday.
David Morrison, senior analyst at financial services firm Trade Nation, said it was "painfully apparent" that most investors had believed that Trump's tariff threats had been a "negotiating tactic that would never be realised in full".
"They appear to be wrong," he said.
Trump said he would speak with the leaders of Mexico and Canada on Monday.
"With tariffs set to come in on Tuesday, there is a small window to come to some sort of accommodation. But President Trump has downplayed the chances of a deal before then," Morrison added.
Trump's tariff threats against Europe overshadowed a defence summit in Brussels on Monday.
"If we are attacked in terms of trade, Europe -- as a true power -- will have to stand up for itself and therefore react," French President Emmanuel Macron said as he arrived for the talks.
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