Asian Stocks Plummet on Trade War Fears
Asian stock markets experienced a sharp decline on Monday as concerns over a global trade war intensified following President Donald Trump's tariffs on Canada, Mexico, and China.
The Japanese Nikkei share average plunged over 2% in early trading, while Australia's benchmark index, often a proxy for Chinese markets, fell by more than 2%. Hong Kong stocks were set to open later in the day, while mainland markets remained closed for Lunar New Year holidays.
Trump imposed 25% tariffs on Canada and Mexico and a 10% levy on China, citing concerns over illegal immigration and drug trafficking. Canada and Mexico vowed immediate retaliation, while China stated that it would challenge the tariffs at the World Trade Organization.
The tariffs, outlined in executive orders, are scheduled to take effect at 12:01 a.m. ET on Tuesday. Market analysts warn that they could trigger a destructive global trade war, drive up U.S. inflation, and damage economic growth.
A model from EY chief economist Greg Daco projects that the tariffs would reduce U.S. growth by 1.5 percentage points and push Canada and Mexico into recession. Barclays strategists estimate that the tariffs could reduce S&P 500 company earnings by 2.8%.
U.S. equity futures pointed lower, with S&P 500 futures falling 1.7% and Nasdaq futures declining 2.5%.
The U.S. dollar surged against the Chinese yuan, reaching a record high of 7.3765 yuan in offshore trading. The dollar also strengthened against the Mexican peso and Canadian dollar.
The euro plummeted against the U.S. dollar, while the Japanese yen was relatively resilient. Cryptocurrency Bitcoin experienced a significant drop, falling over 5% to a three-week low.
Oil prices moved higher, with Brent crude futures rising 1% and U.S. West Texas Intermediate crude increasing 2.4%.