Dollar and oil Surge, Asian stocks fall on Trump tariffs
The yields on US Treasuries gained while stock futures slumped, and an index of Asia-Pacific shares also dropped in response to the punitive measures taken against some of America’s biggest trading partners. The Canadian dollar sank to its weakest since 2003, with euro and Mexican peso also posting losses.
The rapid escalation in tensions is fueling a flight to haven assets as investors brace for the knock-on effects of Trump’s move on everything from inflation to geopolitics and economic growth. While Trump long pledged sweeping trade levies to combat issues such as illegal immigration and illicit drugs, global stocks had rallied in anticipation tariffs would be delayed or avoided as officials sought to negotiate deals.
“The market needs to structurally and significantly reprice the trade war risk premium,” George Saravelos, head of FX research at Deutsche Bank, wrote. “For Canada and Mexico, we see this trade shock — if sustained — as being far larger in economic magnitude than that of Brexit on the UK.”
Behind the rally in the dollar is the bet that tariffs will fuel inflationary pressures and keep US interest rates elevated, while also hurting foreign economies more than the US and adding to the greenback’s safe-haven lure. Foreign currencies get hurt as American demand declines for costlier imports.
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