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Financial markets swayed after Donald Trump took office and did not immediately impose new trade tariffs in his executive orders, but later signalled punitive tariffs on Mexico and Canada.
The new US president told reporters in the White House’s Oval Office that he was thinking about introducing 25% US tariffs on imports from Mexico and Canada as soon as 1 February.
The US dollar, which had initially fallen in the hours after Trump took office, reversed course after the comments to hit five-year highs against the Canadian dollar, and rose by 1% against the Mexican peso.
Financial markets were largely calm in reaction to Trump’s return to the White House. US markets were closed for the Martin Luther King holiday, so Asian markets were the first to respond. Japan’s Nikkei index swung between losses and gains and ended the day 0.3% higher.
Other Asian markets also made modest gains, with Hong Kong’s Hang Seng climbing by 0.95%, while the Shanghai and South Korean exchanges were slightly in the red and the Indian market lost nearly 0.6%.
In Europe, the UK’s FTSE 100 index edged 13 points higher to 8,534 in early trading. Germany’s Dax, France’s CAC and Italy’s FTSE MIB slipped by 0.2%. The pound and the euro lost about 0.5% against the dollar.
US stock futures pared back their strong gains from earlier in the session, leaving them flat to slightly higher.
Richard Hunter, the head of markets at Interactive Investor, said: “The general market reaction has been muted to the new president’s raft of executive orders, even bringing some relief in the absence of the expected immediate announcements on tariffs.”
Investors are also keeping an eye on the World Economic Forum in the Swiss ski resort of Davos, where the world’s political and business leaders are gathered for their annual meeting. They include Ding Xuexiang, the vice-premier of China, where there may be relief that Trump has not fleshed out his plans for taxing Chinese imports.
On Monday, Trump said he wanted to reverse the US trade deficit with the EU through tariffs or more US energy exports.
European natural gas prices fluctuated, after he lifted a moratorium on new export licences, easing uncertainty over longer-term global supply. Dutch month-ahead futures, Europe’s gas benchmark, traded 0.3% higher at €48 a megawatt-hour in Amsterdam.
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The US president also repeated a call for the EU to buy more American oil and gas if the bloc wants to avoid tariffs. The US is already Europe’s biggest supplier of liquefied natural gas.
“More oil production, no indication of crypto mining, punitive tariffs against Mexico and Canada: these are the three key points for investors from Trump’s inaugural address,” said Jochen Stanzl, the chief market analyst at CMC Markets. Brent crude futures were flat at $80.1 a barrel.
“We can only hope that Trump will spare the EU and Germany from punitive tariffs until after the German parliamentary elections, as the outgoing government will hardly be in a position to react to changes in trade relations with the US. However, this reprieve should not be taken as permanent. Sooner or later, Trump will also target Germany.”
Bitcoin, which rose by 4% on Monday to reach a fresh record high above $109,000 on hopes of a crypto-friendly administration, has retreated since then.
Stanzl said: “There were probably one or two investors who had hoped for more. It seems that Trump is prioritising issues other than supporting the crypto industry. But one thing is clear: a positive word from Trump and bitcoin could rise significantly again. Investors are just waiting for it.”
