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Saturday, February 08, 2025  
10 Shaban 1446  

Asian stock markets plummet as US tariffs spark trade war fears

US dollar reached a record high against the Chinese yuan in offshore trading
A person walks past a brokerage in Tokyo, Japan August 2, 2024. Reuters
A person walks past a brokerage in Tokyo, Japan August 2, 2024. Reuters

Asian stock markets experienced significant declines on Monday, with US equity futures also pointing sharply lower, following US President Donald Trump’s imposition of tariffs on Canada, Mexico, and China.

This move has intensified concerns over a potential trade war and its impact on global economic growth.

The US dollar reached a record high against the Chinese yuan in offshore trading, as well as its strongest levels against the Canadian dollar since 2003 and the Mexican peso since 2022.

Japan’s Nikkei share average plunged as much as 2.3% in early trading, while Australia’s benchmark, often seen as a proxy for Chinese markets, fell more than 2%.

Stocks in Hong Kong, which include Chinese company listings, dropped 1.9% after the Lunar New Year holiday. China’s markets are set to resume trading on Wednesday.

Pan-European STOXX 50 futures also fell by 2.7%.

Trump’s tariffs, which include a 25% duty on Canada and Mexico and a 10% levy on China, are scheduled to take effect at 12:01 a.m. ET (0501 GMT) on Tuesday. Trump stated these measures are necessary to address the influx of migrants and fentanyl into the US. Both Canada and Mexico pledged retaliatory actions, while China announced plans to challenge the tariffs at the World Trade Organization.

Economists warn that Trump’s actions could trigger a global trade war, potentially escalating US inflation more rapidly and significantly than previously anticipated. Capital Economics’ Paul Ashworth indicated that the tariffs could reduce US economic growth by 1.5 percentage points this year and lead Canada and Mexico into recession while causing “stagflation” domestically.

Barclays strategists have estimated that the tariffs could result in a 2.8% decline in S&P 500 company earnings, factoring in possible retaliatory measures from affected countries. S&P 500 futures fell by 1.6%, following a 0.5% drop in the cash index on Friday when the White House confirmed Trump’s tariff plans. Nasdaq futures decreased by 2.2%, following a 0.3% loss for the cash index on the same day.

In the currency markets, the US dollar rose 0.5% to 7.3538 yuan offshore, hitting a record high of 7.3765 earlier. The US currency also climbed 2.8% to 21.2547 Mexican pesos, its highest since March 2022, and increased as much as 1.4% to C$1.4755, a level not seen since 2003. The euro dropped 2.3% to $1.0125, its lowest since November 2022, amid fears of being targeted by Trump’s tariffs.

US two-year Treasury yields increased by as much as 3.6 basis points to 4.274%, the highest in a week, reflecting concerns that the tariffs will fuel US inflation and delay interest rate cuts. Similarly, two-year Japanese government bond yields reached their highest levels since October 2008.

Meanwhile, bitcoin fell to a low of $92,997.86, marking a three-week low. Oil prices rose, with US West Texas Intermediate crude increasing by 1.8% to $73.81 a barrel, while Brent crude futures added 0.7% to $76.20 a barrel.

Read more

>Gold gains as dollar dips; Trump’s tariff plans in focus

>Currency market whiplashed on tariff, DeepSeek concerns

>Gold price forecast: New records could be made soon

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