Asian stock markets tumbled on Monday after the Donald Trump administration imposed tariffs on Mexico, Canada and China, fueling fears of a global trade war.
Share markets in Taiwan, Japan, South Korea and Australia saw sharp declines while European markets reacted negatively as well. The American dollar surged against multiple currencies as Mr Trump hinted at future tariffs on the EU.
The US tariffs, set to take effect on Tuesday, impose a 25 per cent tax on all imports, excluding energy, from Canada and Mexico, and a 10 per cent levy on Chinese goods. Though expected, the tariffs pose a threat to global manufacturers by weakening demand from the US and slowing growth.
All major European stock markets fell by over one per cent while Japan’s market closed 2.7 per cent lower.
Mainland China’s market stayed closed for Lunar New Year, but the yuan fell 0.4 per cent against the dollar.
Taiwan’s Taiex dropped 4.4 per cent, driven by a more than 6 per cent slump in the shares of semiconductor giant TSMC. Japan’s Topix fell as much as 2.3 per cent while South Korea’s Kospi declined 2.4 per cent, led by losses for major exporters with global exposure, including electronics makers Samsung and LG and automaker Kia.
Automakers with operations in Mexico were hit the hardest by the bear run, with Toyota and Nissan falling over 5 per cent and South Korea’s Kia Motors dropping more than 7 per cent.
Taiwanese tech firms with factories in Mexico also saw sharp declines, with Foxconn dropping 8 per cent, Quanta falling around 10 per cent and Inventec down 8 per cent.
Australia’s ASX 200 dropped over 2 per cent at the open, pulling back from a record high on Friday Iron ore miners, including BHP and Rio Tinto, declined as commodity prices fell. Hong Kong’s Hang Seng index opened 0.9 per cent lower.
Canada and Mexico vowed to impose retaliatory tariffs while China promised countermeasures and a WTO challenge. Mr Trump justified the tariffs as a response to illegal immigration and drugs coming into the country and warned that EU tariffs were inevitable but suggested a deal with the UK was possible.
Canada is imposing a 25 per cent tariff on select US imports while Mexico’s president Claudia Sheinbaum is pledging countermeasures and preparing a “plan B”.
The imposition of a 10 per cent levy on Chinese goods imported into the US “seriously violates the WTO rules”, China’s commerce ministry said in a statement on Sunday, adding that it would “resolutely defend its rights”.
“We’ll see what happens,” Mr Trump told reporters when asked what countries would be next to be targeted by tariffs. “It will definitely happen with the European Union, I can tell you that.”
“The UK is way out of line. We’ll see,” he added, “but the European Union is really out of line. The UK is out of line, but I think that one can be worked out. But the European Union is an atrocity, what they’ve done.”
He said British prime minister Keir Starmer had “been very nice”. “We’ve had a couple of meetings, we’ve had numerous phone calls. We’re getting along very well. We’ll see whether or not we can balance out our budget,” he said.
“I don’t believe market participants have fully grasped the extent of the potential fallout yet, especially as responses from affected countries unfold,” Tareck Horchani, head of prime brokerage dealing at Maybank Securities in Singapore, told Al Jazeera.
“Investors are rattled at the prospects of a full-blown trade war breaking out,” Susannah Streeter, head of money and markets at Hargreaves Lansdown told the BBC, adding they were “buckling up for a rollercoaster ride for the global economy”.
