(Bloomberg) — The dollar rallied and Asian shares dropped after President-elect Donald Trump said the US will impose additional tariffs on China, Mexico and Canada, ratcheting up concerns about his “America First” policies.
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US equity futures also slipped as Trump said he will place an extra 10% tariffs on Chinese imports and 25% levies on all products from Mexico and Canada in posts to his Truth Social network. He said the new tariffs were needed to clamp down on migrants and illegal drugs flowing across the US border.
The Bloomberg Dollar Spot Index surged as much as 0.7%, while China’s offshore yuan fell 0.4% and Mexican peso and Canadian dollar both tumbled more than 1%. Share benchmarks in Japan, Australia and South Korea all dropped, and Treasury yields climbed.
“The incoming president has started early but this could be a surprise only to those who have forgotten 2016-to-2020,” said Kieran Calder, head of equity research for Asia at Union Bancaire Privee in Singapore. “This is President Trump’s negotiating style: step one, punch in the face, step two, let’s negotiate.”
Commodity currencies such as the Australian dollar also tumbled. The Aussie slid as much as 1.1%, while New Zealand’s dollar dropped 0.8%.
“Trump’s threat of even more tariffs will give another leg up to the US dollar,” said Carol Kong, a strategist at Commonwealth Bank of Australia in Sydney. “Aussie and kiwi will be dragged down because of their links to the Chinese economy.”
Chinese Shares
Chinese stocks bucked the regional equity selloff with the benchmark CSI 300 Index reversing early morning losses to rise 0.2%.
“Markets have been expecting tariffs, but the magnitude is the key,” said Ken Wong, Asian equity portfolio specialist at Eastspring Investments. “At the moment, anything less than the 60% tariff rate should be seen as a positive.”
Gold edged higher following Trump’s comments. Bullion had slumped 3.4% Monday on an easing of tensions in the Middle East that sapped haven demand. Oil was little changed after the dollar rose as Trump threatened tariffs on Canada, Mexico and China.
Trump’s posts came after US stocks and Treasuries had climbed Monday as traders welcomed the incoming president’s pick of Scott Bessent for Treasury Secretary, betting the hedge-fund manager will bring a Wall Street mindset to the role. While Bessent has at times suggested that Trump is signaling a maximalist approach as a negotiation tactic, he signaled strong support for tariffs in an op-ed Nov. 15 for Fox News.