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The US dollar rose on Tuesday after Donald Trump pledged to levy additional tariffs on imports from Canada, Mexico and China, reigniting concerns about his trade policies.
The dollar index, which tracks a basket of currencies including sterling and the Japanese yen, rose 0.4 per cent on Tuesday morning. The Mexican peso plunged 1.3 per cent against the dollar, the largest major currency fall, while the Canadian dollar fell 0.8 per cent.
The dollar index was down about 0.6 per cent on Monday, following Trump’s nomination of hedge fund manager Scott Bessent as Treasury secretary, an appointment investors took as a sign that the president-elect’s policies may be moderated.
But Trump’s announcement shows he is ready to move quickly on imposing tariffs on China and other countries, said Jason Lui, head of Asia-Pacific equity and derivative strategy at BNP Paribas.
The president-elect announced an additional 10 per cent tariff on China as well as a 25 per cent tariff on “all products” from Mexico and Canada.
On Monday “the market narrative was that the nomination of Scott Bessent [was of] someone who understood the market and could reduce the more extreme policy scenarios”, said Lui.
“But by including Canada and Mexico on day one, it may open the door to faster tariffs on other trading partners,” he added.
The yield on the 10-year US Treasury nudged up 0.03 percentage points to 4.29 per cent. Yields move inversely to prices.
Economists at Standard Chartered estimated that a 1 percentage point increase in US tariffs on China resulted in a 1.5 percentage point decline in Chinese exports to the US during Trump’s previous term.
“We estimate that a 10 per cent additional tariff on all imports from China would lead to a roughly 15 per cent decline in China’s exports to the US over the following 12 months, reducing China’s GDP growth by at most around 0.4-0.5 percentage points,” wrote Hunter Chan, Greater China economist at the bank.
Chinese stocks were flat on the tariff news, while the renminbi fell 0.1 per cent against the dollar. The Hang Seng China Enterprises index of Chinese companies listed in Hong Kong was flat, while the mainland CSI 300 index of Shanghai- and Shenzhen-listed companies edged higher by less than 0.1 per cent in Asian afternoon trading.
Brian Arcese, a portfolio manager at Foord Asset Management in Singapore, said there was an element of “relief” in Chinese markets over the announcement, with the tariffs smaller than some expected.
“[It] is largely a function of the tariff proposal being 10 per cent and not 60 per cent . . . though we wouldn’t be surprised to see these numbers change over time,” he said.
Stock markets in the rest of Asia declined. Japan’s export-heavy Nikkei 225 dropped 1.3 per cent, led lower by semiconductor stocks, and Taiwan’s Taiex fell 1.2 per cent, although Trump’s post on his social media site Truth Social did not make references to other countries.
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