AFP – Asian equities rose with the Mexican peso and Canadian dollar yesterday after Donald Trump said he would delay the imposition of stiff tariffs on imports from the United States (US) neighbours, soothing trade war worries for now.
Markets from Japan to New York were sent tumbling on Monday after news at the weekend that Trump had signed off 25 per cent duties against Mexico and Canada, fanning concerns for the stuttering global economy.
Hours before the tariffs were due to take effect, Trump said he had struck deals with Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum on immigration and fentanyl, and would postpone the measures for a month.
Talks on final deals would continue with both countries, he added. Canada and Mexico are the US’ three biggest trading partners and had warned they would retaliate. News of the deals with Mexico and Canada saw the Mexican peso surge more than three per cent – having tumbled to a three-year low on Monday – before paring the gains slightly. The Canadian dollar jumped more than one per cent.
Asian stock markets also advanced, though unease about the lack of movement on averting the Chinese tariffs saw traders’ pare the morning’s gains.
Hong Kong, which rose more than three per cent in the morning, was up more than two per cent, with analysts saying the measures so far would not have a major impact on China’s economy.
Tokyo, Seoul, Manila, Sydney, Mumbai, Bangkok, Wellington and Taipei were also in the green. Sydney and Singapore edged down.
The euro and British pound remained under pressure after Trump warned the European Union would be next in the firing line, while he did not rule out tariffs against Britain.
“A risk is that this is the beginning of a tit-for-tat trade war, which could result in lower gross domestic product growth everywhere, higher US inflation, a stronger dollar and upside pressure on US interest rates,” said Chief Market Strategist and Head of Franklin Templeton Institute Stephen Dover.
“At the margin, these tariffs should encourage more domestic production of goods in the US. However, the uncertainty surrounding the permanence of these tariffs makes it challenging for companies to make informed capital investment decisions.”
The volatile start to February on markets follows their rollercoaster ride last week after China’s DeepSeek unveiled a cheaper artificial intelligence model rivalling those of US tech giants, sparking questions over the vast sums invested in the sector in recent years.
“One thing we can say for sure. Markets are going to remain subject to massive headline risk in coming hours… days… and years,” Ray Attrill at National Australia Bank warned.
Gold spot prices held gains after spiking to a new record high of USD2,830.74 on Monday, having retreated from last week’s all-time peak owing to the stronger dollar and as traders sought out the metal as a safe haven from uncertainty.
