Stock markets on edge as Trump signals potential new tariffs

Stock markets in the Asia-Pacific region saw modest gains on Tuesday following President Donald Trump’s comments about potentially imposing new tariffs on Mexico and Canada. Shares were mostly flat to slightly higher after Trump, in his inaugural address, reiterated his commitment to ushering in a “golden age” for America with an ambitious agenda that includes trade reforms, tax cuts, and deregulation, all of which could potentially boost corporate profits.

However, some economists caution that these measures could also drive up inflation, possibly prompting the Federal Reserve to raise interest rates. In a statement from the Oval Office, Trump mentioned considering a 25% tariff on both Mexico and Canada, citing the high number of people and illegal drugs, such as fentanyl, entering the U.S. from these countries.

Additionally, Trump issued a presidential memo directing federal agencies to investigate why the U.S. continues to import more than it exports, while also examining potential unfair trade practices and currency manipulation by other nations. He also indicated that new tariffs on China could depend on the outcome of negotiations regarding TikTok’s future. Trump warned that if China were to block such an agreement, it would be seen as a “hostile act.”

Despite these remarks, Trump emphasized that the U.S. is not yet prepared to impose tariffs on all imports. During his election campaign, he proposed a universal 10% tariff and suggested a 60% import tax on China. While Trump claims these tariffs will make Americans wealthier, critics argue the costs would likely be passed on to consumers.

The President also announced plans to create an “External Revenue Service” to collect tariffs, duties, and other revenues from foreign sources.

In the Asia-Pacific markets, Hong Kong’s Hang Seng rose 1%, Japan’s Nikkei 225 was up 0.1%, South Korea’s Kospi gained 0.2%, and Australia’s ASX 200 increased by about 0.6%. Meanwhile, the dollar regained ground against major currencies such as the pound and the euro.

Tim Waterer, chief market analyst at KCM Trade, noted that investor sentiment was impacted by the details surrounding Trump’s tariff plans. “Market sentiment was dented during the signing of executive orders by President Trump in the Oval Office,” he said.

Other analysts warned that Trump’s return to the White House could bring renewed volatility to the markets. “The first few hours of the Trump administration have underscored that the policy environment will be dynamic once again, and markets should brace for volatility,” said Charu Chanana, chief investment strategist at Saxo Bank.

U.S. markets were closed on Monday for the Martin Luther King Jr. Day holiday.