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The US dollar rose sharply and European equities fell on Tuesday as investors were disappointed by President-elect Donald Trump’s pledge to increase tariffs on imports from Canada, Mexico and China.
The dollar The index, which tracks a basket of currencies including sterling and the yen, was up 0.1 percent in London, while it rose sharply in Asian trade.
Money in countries that wanted to pay money has fallen. The Mexican peso fell the most, down 1.1% against the greenback, while the Canadian dollar fell 0.9%.
In Europe, where the threat of direct tariffs and a slowdown in China have worried investors, the broader Stoxx Europe 600 index fell 0.6%.
The move reflects a slight reversal of Monday’s trading, while investors received the appointment of hedge fund manager Scott Bessent as Treasury secretary – is seen by investors as a sign that Trump’s policies can be managed. That sent the dollar, which had risen sharply in recent months, lower.
“Markets are in yo-yo at the moment,” said Emmanuel Cau, an analyst at Barclays. “It saw the selection of Bessent as a strange move yesterday, but today it is a complete change, [with the perception that] Trump will have a tough tax plan. “
In a post on his Truth Social website late Monday, Mr. Trump announced plans for a 10 percent surcharge on goods from China and a 25 percent tax on “all imports” from Mexico and Canada.
U.S. Treasuries, which were the biggest gainers on Monday, gave up some of their gains on Tuesday, pushing the 10-year yield up 0.04 percent to 4.3 percent. They have struggled in recent weeks on fears that tariffs will push up inflation and raise interest rates.
The market is waking up to negative news from the Trump administration, said Laura Cooper, head of senior debt at Nuveen. “It is not that the amount of sugar in the economy is not increasing,” he said.
Although Trump singled out China, Canada and Mexico, European companies that feared they would be hit by the fallout declined. Daimler Trucks was one of the biggest fallers in the Stoxx 600, down 3.7 percent. Stellantis and Volvo shares were also limited.
In Japan, the top export-heavy Topix closed up 1 percent, while Taiwan’s Taiex ended the day 1.2 percent weaker.
Chinese stocks, however, shrugged off the news, with the renminbi down 0.2 percent against the dollar, with prices for Chinese imports falling more than some had feared.
Brian Arcese, director of operations at Foord Asset Management in Singapore, said there was “relaxation” in Chinese markets at the announcement. “[It] it is largely a function of the tariff proposal being 10 percent and not 60 percent. . . although we would not be surprised to see these numbers change over time,” he said.
Economists at Standard Chartered say a 1 percent increase in US tariffs on China led to a 1.5 percent drop in Chinese goods to the US during President Trump’s first term.
On Monday, “the news in the market was that the appointment of Scott Bessent [was of] someone who understood the market and can reduce the events of the process”, said Jason Lui, director of Asia-Pacific equity and derivative strategies at BNP Paribas.
“But including Canada and Mexico on day one, it could open the door to faster pricing for our trading partners,” he added.
Additional reports from Rafe Uddin in London
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