Trump tariffs live: stock markets roiled by global trade war fears as Canada, Mexico and China retaliate

There has been much analysis on China’s rather muted response to Trump’s tariff threats both in the lead in to and aftermath of Saturday’s announcement. Some have put it down to the weakness of China’s domestic economy and it’s eagerness to get to the negotiating table and ward off Trump’s earlier election campaign threats of 60% tariffs.

The Wall Street Journal is reporting that China’s initial proposal to tariffs imposed by US President Donald Trump’s administration will centre on restoring the “phase one” trade deal signed in 2020 during Trump’s first term.

As part of its effort to prepare for negotiations … China’s initial proposal will center on restoring a trade agreement Beijing signed in early 2020 with the first Trump administration but didn’t implement.

The so-called Phase One deal required China to increase purchases of American goods and services by $200bn over a two-year period. While Trump himself has described Phase One as the “greatest deal” ever made, many trade experts and business executives called it unrealistic to begin with.

Having failed to deliver on its pledge under the deal to increase US purchases, Beijing now is preparing to talk to the Trump administration about areas where China can buy more from the US, the people said.

Bloomberg, meanwhile, reports that with Trump’s levies set to take effect just after midnight on Tuesday, Xi has a range of tools to respond beyond reciprocal tariffs. Options include export controls on critical minerals and market access restrictions to some American firms, according to Gary Ng, senior economist at Natixis SA. A series of laws passed since Trump’s first term give China greater sway over domestic business deals in the name of national security.

Even so, the situation is also more complicated for China compared with the first trade war, both at home and abroad.

Bloomberg Economics estimates Trump’s initial levy could knock out 40% of Chinese goods exports to the US, jeopardizing 0.9% of China’s gross domestic product. Goldman Sachs Group Inc. said the additional 10% tariff would weigh on real GDP growth by 50 basis points this year, though it noted that Trump’s action “is less severe than market participants and Chinese policymakers feared.”

“If Chinese policymakers were indeed preparing for worse, then they are likely to react in a restrained manner for the time being and to adjust course later if needed,” Goldman Sachs economists said in a note on Monday.

Bloomberg has characterised the rapid escalation in trade tensions as “the most extensive act of protectionism taken by a US president in almost a century, given its knock-on effect on everything from inflation to geopolitics and economic growth.”

“He seems to be like a poker player who’s betting his whole stash on the first hand,” Steven Englander, global head of G-10 FX research at Standard Chartered plc, told Bloomberg on Monday. “The market just wasn’t prepared for it.”

In Canada, the department of finance has published a list of US products imported into Canada that it will target with a 25% retaliatory tariff starting on Tuesday.

The list shows products that will be hit in the first round of retaliatory tariffs by Canada starting on Tuesday, and mounts to $30bn Canadian dollars’ worth of goods (about US$20bn). The impacted products include tobacco, produce, household appliances, firearms and military gear.

Canada is also preparing for a second, broader round of retaliatory tariffs in 21 days that will target an additional C$125bn (US$86bn) worth of US imports. The second list would include passenger vehicles, trucks, steel and aluminum products, certain fruits and vegetables, beef, pork, dairy products and more.

The Australian trading day closed a short while ago and the Australian dollar and the benchmark ASX200 have both plunged after US President Donald Trump fired the first shot in what threatens to be a trade war that could crimp global growth, the Australian Associated Press reports.

The ASX200 index suffered its worst loss in four months on Monday, dropping 152.9 points, or 1.79 per cent, to a two-week low of 8,379.4.

The dollar meanwhile fell under 61 US cents for the first time since early in the Covid-19 pandemic, dropping as low as 60.88 US cents.

By late Monday afternoon it was back over that level but still down sharply, buying 61.22 US cents, from 62.25 US cents at Friday’s ASX close.

Australia’s big iron ore miners, BHP, Rio Tinto and Fortescue were earlier down between 2 and 5 percent on prospects the tariffs would stunt global growth.

Shares of Japanese and South Korean automakers and their suppliers led declines in Asia on Monday, as exporters across the region were walloped by US President Donald Trump’s introduction of sweeping tariffs on Mexico, Canada and China.

The move by Trump, though widely expected, knocked some of the world’s biggest manufacturers, as investors grappled with the prospect of weakening demand from the world’s top economy and, more worryingly, the possibility of a downturn in global growth, Reuters reports.

Toyota, the world’s top automaker, and smaller rival Nissan fell more than 5%. Honda tumbled more than 7%.

Nissan has two plants in Mexico, where it makes the Sentra, Versa and Kicks models for the U.S. market. It exports about 300,000 vehicles to the US a year.

Honda sends 80% of its Mexican output to the US market, and its chief operating officer Shinji Aoyama warned in November it would have to think about shifting production if the U.S. were to impose permanent tariffs on imported vehicles.

South Korea’s Kia Motors which has a factory in Mexico, fell nearly 7%. South Korean electric vehicle battery firms and battery materials makers, which had plans to build factories in Canada to supply to GM, Ford and other companies slumped.

Donald Trump has threatened to widen the scope of his trade tariffs, repeating his warning that the European Union – and potentially the UK – will face levies, even as he conceded that Americans could bear some of the economic brunt of a nascent global trade war.

It comes as Trump’s 25% tariffs on Mexico and Canada, and 10% tariffs on China, announced on Saturday, sparked retaliation from all three countries. Mexico and Canada have vowed levies of their own while China and Canada are seeking legal challenges.

While Trump said new tariffs on the EU will “definitely happen”, he appeared to take a softer line on the UK, citing a good relationship with prime minister Keir Starmer while saying tariffs still “might happen”.

“The UK is out of line but I’m sure that one, I think that one can be worked out,” he said.

Trump acknowledged the sweeping tariffs he has imposed on Mexico, Canada and China may cause “short term” pain for Americans as global markets reflected concerns the levies could undermine growth and reignite inflation.

“We may have short term some little pain, and people understand that,” he said. “But long term, the United States has been ripped off by virtually every country in the world.”

Here’s a summary of the latest market moves and developments as Asian markets, cryptocurrencies and US and European stock futures slumped in Asian trading hours on Monday:

• Stocks in Hong Kong, fell nearly 2% while China’s markets remained closed for the lunar new year holiday break.

• Japan’s Nikkei share average tumbled as much as 2.3% in early trading, and Korea’s Kospi fell as much as 2.4%. Taiwan’s Taiex fell 4.4% at the open, led by a more than 6% plunge in semiconductor heavyweight TSMC.

• In the US, S&P 500 futures slid 1.6% and Nasdaq futures slumped 2.2%. European futures fell as much as 3.4%.

• The US dollar shot to a record high of 7.3765 against the Chinese yuan in offshore trading, and its highest against the Canadian dollar since 2003 and the strongest against the Mexican peso since 2022.

• The euro fell by as much as 2.3% in response to Trump’s latest tariff threat, to near parity with the US dollar at $1.0125, the lowest since November 2022, before recovering to reclaim levels above $1.02.

• Bitcoin was down by more than 6% to about $93,000. Ether, the second-largest cryptocurrency by market value, fell as much as 27% to $2,135, before paring some losses.