SINGAPORE/LONDON/NEW YORK (Reuters) – Global shares and U.S. Treasuries were volatile while the dollar rebounded on Tuesday in choppy trading in the first few hours of Donald Trump’s new presidency after he announced plans for trade tariffs on neighbouring countries.
Trump was quoted saying his team was thinking of tariffs around 25% on Canada and Mexico which could be announced on Feb. 1. The comments came as a surprise given officials had earlier signalled any new taxes would be imposed in a “measured” way.
Here are some comments from investors and analysts:
SHOKI OMORI, CHIEF GLOBAL DESK STRATEGIST, MIZUHO SECURITIES, TOKYO
“Twenty five percent looks high as a starter, and markets reacted quickly, especially in FX. I think market participants thought Trump would start with China, with say a 10%-20% tariff on goods but gradual increase.”
“USDCNH (dollar/Chinese yuan) cheapening is temporary, I doubt it will continue. USDCNH is set to go lower with the Trump administration coming up with tariffs.”
CHARU CHANANA, CHIEF INVESTMENT STRATEGIST, SAXO, SINGAPORE
“The first few hours of Trump administration has underscored that policy environment will be dynamic once again and markets should brace for volatility. Clearly, the markets celebrated too soon with tariff threats missing at the outset in Trump’s inaugural speech.”
“However, the respite was short-lived and latest announcement on Canada and Mexico tariffs likely to be enacted Feb 1 reaffirmed that the tariff threat was only delayed and not averted. Still, the absence of any threats on China has kept the hopes of a negotiation alive there, especially after the Trump-Xi phone call last week as well.”
BORIS KOVACEVIC, GLOBAL MACRO STRATEGIST, CONVERA, VIENNA
“Investors now face a new reality where sudden policy shifts and increased volatility are the norm. Europe finds itself caught between the U.S. and China, with its two largest economies lacking majority governments and policy uncertainty hitting record highs.”
“Trump is expected to push for trade protectionism and economic nationalism, but the key question is how aggressively he will pursue this agenda.”
RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW VERNON, NEW JERSEY
“The biggest reaction is what appears to be the delay on the tariffs. Of all the proposals that are being put forward, that was the one that was most likely to affect the market more dramatically both for its inflationary-potential and just for whatever retribution that would have been for it.”
“When you say you’re going to study and try to negotiate it after you said that you will do it on Day 1, I think that’s encouraging for the market.”
EUGENE EPSTEIN, HEAD OF TRADING AND STRUCTURED PRODUCTS, NORTH AMERICA, MONEYCORP, NEW JERSEY
“There are so many people surprised in some ways of how things are shaping up even though the playbook that Trump basically runs is exactly the same as the first four years. He uses tariffs as a negotiating tool. It seems like he will impose tariffs regardless. The question is how severe. He has a lot of flexibility though in how he can impose them.”
“As far as position-taking goes, it’s very important to stay calm and cautious. This is just the first day and there really have not been much answers just yet. Just because he hasn’t announced sweeping tariffs the first day, it means absolutely nothing in terms of long-term tariff policies. Trade policies with specific numbers, even for him, will probably have to have some semblance of official negotiations before making a decision.”
ZACHARY GRIFFITHS, SENIOR INVESTMENT GRADE STRATEGIST, CREDITSIGHTS, CHARLOTTE, NORTH CAROLINA
“The rally in the dollar and equity futures was due to expectations that Trump will… not be putting direct tariffs on any country today. That seems to be a relief trade.”
“But if you look at what Trump said in his speech, it looks like he’s quite firm on tariffs. I think there’s more to come there.”
“In terms of opting to not impose tariffs today and that being a market-positive, I’m a little skeptical of that and I am not sure that holds. If you have a more gradual, but still large tariffs in terms of percentage on a broad swath of countries, and if that is rolled out over time, that could be more challenging from an inflation-perspective for the Fed and could even result in policy being tighter for longer.”
NIGEL GREEN, CEO, DEVERE GROUP
“The energy sector will undoubtedly be the most immediate beneficiary of this sweeping policy shift.”
“Companies involved in oil and gas exploration, extraction, and infrastructure stand to gain as regulatory barriers are dismantled and investment in domestic production soars. Shares of U.S. energy giants and mid-cap firms are likely poised for significant upward momentum as the markets price in increased output and profitability.”
MARC CHANDLER, CHIEF MARKET STRATEGIST, BANNOCKBURN GLOBAL FOREX, NEW YORK
“Even though Trump did not specify, it’s very clear that when he says that the U.S. is going to be a big auto manufacturer, he’s talking about tariffs. So whether he imposes them in Day 1 or Day 5 or Day 10, I’m not sure it makes that much of a difference.”
“The idea that he is going to be able to raise $2 trillion in tariffs seems to be an exaggeration. The U.S. imports only $1 trillion of goods, so what does he mean that he will be able raise $2 trillion and over what time period? It doesn’t make sense.”
(Reporting by Ankur Banerjee, Kevin Buckland, Rae Wee, Saeed Azhar, Aida Pelaez-Fernandez, Dhara Ranasinghe, and Gertrude Chavez-Dreyfuss; Compiled by Karin Strohecker and Gertrude Chavez-Dreyfuss; Editing by Stephen Coates)
