• Investing
  • Stock
  • Editor’s Pick
  • Economy
The Significant Deals
Editor's Pick

Tarrified: Markets feeling the most pinch from Trump tariff risks

by January 8, 2025
written by January 8, 2025

LONDON (Reuters) – From China to Europe, Canada to Mexico, world markets are already reeling from Donald Trump’s promise to jack up tariffs when he becomes U.S. president in less than two weeks. 

Trump has pledged tariffs of as much as 10% on global imports and 60% on Chinese goods, plus a 25% import surcharge on Canadian and Mexican products, duties that trade experts say would upend trade flows, raise costs and draw retaliation.

The scale and scope remains to be seen, but the road ahead is bumpy. Here’s a look at some markets in focus right now. 

1/ FRAGILE: CHINA 

“China is likely to be the primary target of the Trump trade wars 2.0,” say Goldman Sachs. Investors are already getting ahead, forcing the country’s stock exchanges and central bank to defend a tumbling yuan and stocks. 

China’s tightly controlled currency is at its weakest in 16 months, with the dollar trading above the symbolic 7.3 yuan milestone which authorities had defended. 

Barclays (LON:BARC) sees the yuan at 7.5 per dollar by end-2025, and sliding to 8.4 in a scenario in which the U.S. imposes 60% tariffs.

Even without tariffs, the currency has been hurt by a weak economy pushing down Chinese government bond yields — widening the gap with elevated U.S. Treasury yields. 

Analysts expect China to let the yuan weaken further to help exporters manage the impact of tariffs, but gradually. 

A sudden plunge would bring lurking fears of capital outflows to the fore, and jolt confidence, already bruised after stocks just saw their biggest weekly fall in two years.   

Investors in other major Asian exporters such as Vietnam and Malaysia are also nervous.  

2/ EURO’S TOXIC MIX

The euro has slid over 5% since the U.S. election, the most among major currencies, to two-year lows around $1.04. 

JPMorgan and Rabobank reckon the single currency could fall to the key $1 mark this year, as tariff uncertainty weighs.    

The U.S. is the European Union’s most important trading partner, with $1.7 trillion in two-way goods and services trade.

Markets anticipate 100 basis points of European Central Bank rate cuts this year to bolster a lackluster economy. But traders, speculating that tariffs could boost U.S. inflation, anticipate just 40 bps of Fed rate cuts, enhancing the dollar’s appeal over the euro.

A weakening Chinese economy also hurts Europe.

Tariffs hitting China and the EU at the same time could be a “very toxic mix for the euro”, said ING currency strategist Francesco Pesole.

3/ CAR TROUBLE

In Europe, auto stocks are also particularly sensitive to tariff-headlines. 

On Monday, a basket of auto names briefly shot up almost 5% on a Washington Post report that Trump aides are exploring import duties only for critical imports but then fell as Trump denied the article.

The swings highlight investors’ touchiness on an already-depressed sector that has seen its shares shed a quarter of their value since an April 2024 peak and their relative valuations plunge.

Barclays’ head of European equity strategy Emmanuel Cau said autos are among the trade-exposed, consumer sectors he is watching. Others include staples, luxury goods and industrials.

A Barclays basket of the most tariff-exposed European stocks is down about 20%-25% relative to the main market in the past six months. 

Euro zone economic weakness could also prolong European equities’ underperformance. The STOXX 600 rose 6% in 2024, while the S&P 500 index surged 23%.

4/ GOING LOONIE

Canada’s dollar is near its weakest in over four years, having fallen sharply after Trump in November threatened a 25% tariff on Canada and Mexico until they clamped down on drugs and migrants.

It has potential to fall further. Goldman analysts reckon markets may only be pricing about a 5% chance of such a tariff, and while they think this is unlikely to materialise, prolonged trade talks could keep risks alive.

A fully-fledged trade war necessitating additional Canadian rate cuts could push the loonie to the 1.50 mark against the U.S. dollar, said ING’s Pesole. That would imply a further weakening of almost 5% from around 1.43 now.

Canadian Prime Minister Justin Trudeau’s resignation further complicates the outlook. 

5/ VOLATILE PESO 

The Mexican peso was already down 16% against the dollar in 2024 when Trump was elected, so a lot of news – both good for the dollar and bad for the peso – was priced in.

The peso’s 2024 performance, a 18.6% drop, was its weakest yearly showing since 2008. Besides the threat of tariffs from the U.S. – the destination of 80% of Mexico’s exports – a controversial judicial reform also affected the currency.

Monday’s tariff news, later denied by Trump, sent the peso up as much as 2% before it pared gains, highlighting that volatility may continue as trade along the U.S. southern border remains a target for the President-elect.    

This post appeared first on investing.com
0 comment
0
FacebookTwitterPinterestEmail

previous post
Asia dollar bond volumes seen rising 20% as China deals gather pace
next post
ASEAN entering 2025 with strong starting position on growth, BofA says

You may also like

China central bank conducts 1.7 trln yuan of...

January 27, 2025

Fuji Media, rocked by sexual misconduct allegations, says...

January 27, 2025

ECB president fears loss of central bank independence

January 27, 2025

European tech shares tumble as China’s AI push...

January 27, 2025

Futures slip as investors eye China’s latest AI...

January 27, 2025

Markets may be repeating the mistake of 2019,...

January 27, 2025

How billionaire Caltagirone could influence Italy’s banking M&A...

January 27, 2025

How Italy’s MPS went from near collapse to...

January 27, 2025

Analysis-To weather Trump, emerging market investors look to...

January 27, 2025

Chinese AI startup DeepSeek overtakes ChatGPT on Apple...

January 27, 2025
Fill Out & Get More Relevant News








    Stay ahead of the market and unlock exclusive trading insights & timely news. We value your privacy - your information is secure, and you can unsubscribe anytime. Gain an edge with hand-picked trading opportunities, stay informed with market-moving updates, and learn from expert tips & strategies.

    Recent Posts

    • Procter & Gamble to cut 7,000 jobs as part of broader restructuring

      June 6, 2025
    • Shein and Temu see U.S. demand plunge as loophole for cheap goods closes

      June 6, 2025
    • Shein and Temu see U.S. demand plunge as loophole for cheap goods closes

      June 5, 2025
    • This California startup is cleaning water and removing CO₂ from the atmosphere — all at a reduced cost

      June 5, 2025

    Categories

    • Economy (245)
    • Editor's Pick (3,646)
    • Investing (504)
    • Stock (6,426)

    Latest News

    • Procter & Gamble to cut 7,000 jobs as part of broader restructuring
    • Shein and Temu see U.S. demand plunge as loophole for cheap goods closes

    Popular News

    • AI data centres to bolster renewable energy demand even under Trump, says MUFG Americas CEO
    • Retailers saw a dismal fall quarter. The election seems to be turning things around.

    About The Significant deals

    • Privacy Policy
    • Terms & Conditions

    Copyright © 2025 thesignificantdeals.com | All Rights Reserved

    The Significant Deals
    • Investing
    • Stock
    • Editor’s Pick
    • Economy