Donald Trump is stirring up markets with the threat of tariffs against Mexico and Canada

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Donald Trump sent shockwaves through the stock market hours after his inauguration as he threatened to hit Mexico and Canada with huge tariffs.

Speaking in the Oval Office late on Monday, Trump said he could impose tariffs of 25 percent against both countries as soon as March 1, repeating earlier threats to hit two of the US’s closest trading partners. with retaliatory charges for weak border protection and fentanyl. the transaction.

Trump’s renewed warnings sent the Mexican peso sliding 1.1 percent against the U.S. dollar, and the Canadian dollar down 0.9 percent as Tuesday’s trading session continued in the Asia-Pacific region.

Both funds were largely recovered on Monday after administration officials said Trump it would avoid immediately punishing key partners with taxes and instead study the state of trade.

The price swings highlight how investors are bracing for turmoil this week, particularly in financial markets, as Trump plans to repeal many of Joe Biden’s policies and create an executive order. security program that makes the American economy stronger.

“This kind of uncertainty is the new normal,” said Eric Winograd, an economist at AllianceBernstein. “Policy under the Trump administration may be less predictable and less focused than we were used to under the Biden administration.”

The greenback’s broad sell-off also eased after Trump’s comments on tariffs, with the dollar index, the currency’s benchmark against six peers, narrowing its fall to about 1.3 percent in to just 0.7 percent. Futures tracking Wall Street’s S&P 500 index also posted gains of about 0.5 percent.

In a sign of how Trump intends to use trade terms as an important negotiating tool, the new president on Monday night attacked the EU, threatening the bloc with tariffs if it does not buy more US oil.

“They don’t take our cars, they don’t take our farm produce, they don’t take anything,” Trump said. However, we take their cars and we take their farm products, we take a lot from them. So we will get that through tariffs or they have to buy our oil. ”

The euro, the heaviest against the dollar, was down 0.5 percent against the greenback at $1.04 in early Asia-Pacific session Tuesday, while the rest returned 1 percent gain in Monday. Sterling fell 0.4 percent to $1.23 after rising 0.8 percent the previous day.

In Asian markets, traders were relieved after Trump refused to immediately take trade measures against China, as he has warned he would do if Beijing refuses to impose restrictions. part of the US social media app TikTok.

The CSI 300 index of domestically listed companies opened up 0.5 percent, while Hong Kong’s Hang Seng rose 1 percent. The onshore renminbi also strengthened to a six-week high of 7.25 dollars.

“The short version is that we may have avoided the worst-case scenario from a risk asset perspective. There were no overnight rates in China,” said Jason Lui, Apac’s head of equity and policy from BNP Paribas.

“China’s equity market (already) took action after the Trump-Xi phone call over the weekend, which is why there is a more measured reaction.”

Reporting by Adam Samson, Aime Williams, Harriet Clarfelt, Arjun Neil Alim, Leo Lewis and Nic Fildes