The global market was set for a new jolt on Monday after US President Donald Trump launched a large target war in Canada, Mexico and China which threatened to damage economic growth and revive inflation.
With Mexico and Canada – the two US Top Trading Partners – swear immediately and China said they would take “counter actions”, the scene was determined for turbulence.
The market was hit last week because of the emergence of the AI Deepseek China model which hit technology shares, and the uncertainty about Trump’s tariff has burdened a wider market.
The risk of a global trade war can damage the profits of US companies and pressure inflation, potentially increase the expectations of the US interest rate, and further weaken currencies such as Canadian dollars and Yuan China.
“I think the market will react to this,” said Mark Malek, head of investment in Siebert Financial in New York. “Until now the market is really on Trump’s side, but it can change and the market can challenge it for the first time.”
In three executive orders, Trump imposed a 25% tariff on Mexican imports and most Canada and 10% of goods from China, starting Tuesday.
Canada said it would respond at a tariff of 25% to $ 155 billion US goods, starting with $ 30 billion, starting on Tuesday and $ 125 billion 21 days later.
“This is negative for CAD, MXN and CNH, as well as the overall risk,” Nick Twidale, Head of Market Analyst at ATFX Global in Sydney said referring to the Canadian, Mexico and China currencies.
He anticipated a fairly large movement in the currency when the Asian Open market after the hope for the suspension of dysfunction.
The Canadian dollar has been on the firing lane in the last few days, reaching the lowest position of five years around 1,459 per dollar last week.
Mexico Peso will decrease by almost 12% if the US touches the country with a 25% trade rate, JPMorgan is estimated in the record issued on Friday. Mexico peso is traded around 20.6 per dollar Friday night.
Analysts also expect a kind of selling action in stocks and other higher risk assets when the market is reopened on Monday.
Gene Goldman, Head of Investment in Cetera Financial Group, said the combination of high assessment, the impact of tariffs on inflation and the impact on the Federal Reserve policy will contribute to the decline.
With S&P 500 approaching the highest of all time, the index can move 3% to 5% in both directions in the short term, the expert on the Evercore contents strategy in a note.
Tariff pain
Barclays strategists previously estimated that tariffs could make 2.8% drag on the revenue of the S&P 500 company, including the fall that was projected from the steps of retaliation from targeted countries.
Executive orders include the provisions for Trump to increase the size and scope of tariffs if the affected countries try to reply.
Economist Goldman Sachs estimates that the cross-papan tariffs in Canada and Mexico will imply an increase of 0.7% in core inflation and 0.4% hit for gross domestic product.
The potential to increase consumer prices is a very sensitive area for investors, who are worried about the revival of inflation that causes the federal reserve to stop the cutting rate.
The Fed last week stopped the tariff cutting cycle, while Fed Chair Jerome Powell said the officials “waited to see what policies were imposed” with the new president.
European central bank policy makers Klaas Knot said on Sunday he hoped that new tariffs would cause higher inflation and interest rates in the US that were likely to weaken the Euro.
Europe also faces the risk of US tariffs.
“It’s only a matter of time before the EU is targeted,” said Marchel Alexandrovich, an economist in the Saltmarsh economy in London.
“Meanwhile, the fact that Canada responds and charge tariffs on US goods is a sign of the things that will come and show the risk of global trade.”
Source: Reuters
