Markets brace for new economic shock after Trump tariffs

Global financial markets braced for more shocks on Monday after US President Donald Trump announced massive tariffs on imports from Canada, Mexico and China, effectively starting a new phase of the trade war. According to Reuters, the moves have already prompted promises of retaliation from all three countries, raising the risk of global economic turmoil.

Mexico and Canada, the US’s two largest trading partners, immediately announced their intention to take appropriate measures in response to the new tariffs. China also announced that it would take countermeasures, which puts additional pressure on the global economy and increases the likelihood of further escalation of global trade tensions.

Such actions could lead to higher inflation and affect the profits of US corporations, as higher tariffs reduce trade turnover between countries. It could also overturn forecasts for lower interest rates in the US, as well as weaken the currencies of countries such as Canada and China. Mark Malek, chief investment officer at Siebert Financial in New York, said markets are still supportive of Trump, but that could change, creating new risks for the economy.

Nick Tweedale, chief market analyst at ATFX Global in Sydney, predicts that the new turmoil will weigh on the currencies of Canada, Mexico and China. He also expects significant volatility in the currency markets when Asian markets open on Monday. He estimates that the Canadian dollar has already hit a five-year low of 1.459 per U.S. dollar last week.

The Mexican peso is also under significant pressure, with the exchange rate falling to 20.6 per dollar late last week, a significant drop. Analysts predict that the peso could lose up to 12% of its value in the coming days. Markets could also face a wave of sell-offs in stocks and riskier assets.

All of these economic shocks could change market expectations for economic growth in the United States and elsewhere, leading to further volatility in currency and stock markets. The situation remains volatile, and further US trade actions could determine economic trends in the coming months.