Global stock markets took a hit on Monday as US President Donald Trump threatened to launch trade wars with Canada, China, and Mexico.
Trump announced 25% levies on imports from Canada and Mexico and 10% duties on Chinese goods, citing concerns over illegal immigration and fentanyl imports.
Wall Street’s three main indices fell sharply but later recovered some ground after Trump postponed the introduction of tariffs on Mexico for one month.
The Dow Jones Industrial Average closed down 0.2% at 44,462.13 points, while the S&P 500 and Nasdaq Composite Index fell 0.7% and 1.1%, respectively.
Global Markets React
European markets also felt the pinch, with the London FTSE 100, Paris CAC 40, and Frankfurt DAX indices all closing in the red. Asian markets followed suit, with the Tokyo Nikkei 225 index plummeting 2.7%.
The tariff threats have sparked fears of a global trade war, with investors dumping risk assets. “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.
Investors sold stocks and bought dollars as Trump imposed new tariffs on Mexico, Canada, and China, affecting $1.3 trillion in trade. Markets tumbled, with Japan's Nikkei down 3% and European car stocks plunging. Retaliatory tariffs loom https://t.co/lLUu9BRH0Q pic.twitter.com/ixCD60dMrM
— Reuters Business (@ReutersBiz) February 3, 2025
Analysts warn that the tariffs could fuel inflation and drag down economic growth. Trump’s admission that Americans may feel economic “pain” from his tariffs has done little to alleviate concerns.
The US dollar yo-yoed against major currencies, including the Mexican peso and Canadian dollar. Oil prices also jumped, but later gave up their gains.
As the global economy teeters on the brink of a trade war, investors are left wondering what’s next. Will Trump’s tariff threats spark a full-blown trade war, or will diplomatic efforts prevail? One thing is certain – the world is watching with bated breath.
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