In London on Feb 7 (Reuters) - The U.S. President's unpredictable decisions on tariffs with key trading partners have caused turmoil in global markets.
For instance, he initially imposed substantial tariffs on Canada, Mexico, and China but later postponed the tariffs on Canada and Mexico by one month.
These actions highlight the ongoing risk of a global trade dispute that could hinder economic growth and fuel inflation.
According to Tina Fordham, founder and geopolitical strategist at Fordham Global Foresight, The White House's recent actions have left the international community confused and uncertain about who could be the next target and how to respond.
A week after the tariff announcement, here is the status of some severely affected markets:
- The Canadian dollar faced significant volatility, reaching over 20-year lows but rebounding, experiencing its largest single-day swing in nearly five years. However, the Loonie's relief might be short-lived due to the lingering threat of 25% tariffs.
- Uncertainty surrounding tariffs could continue to weigh on Canada, potentially prompting rate cuts.
- Mexico's currency has been volatile following last year's losses after the tariff threats. The peso has fluctuated this year but could suffer further in a scenario with 25% tariffs, potentially leading to a recession.
- The euro has been under pressure since the U.S. election, with a 5% slide and predictions of further decline due to trade uncertainties with the U.S.
- European automakers, such as Stellantis and Volkswagen, have experienced share-price fluctuations amidst tariff concerns, impacting their industry profitability.
- Market analysts suggest the euro could decline further, anticipating additional rate cuts by the European Central Bank compared to the Federal Reserve.
- The U.S.-China trade war may have repercussions on European markets, potentially leading to deflationary pressures as Chinese goods redirected from the U.S. flood European markets.
- China has exhibited a restrained response to U.S. tariffs, with a managed yuan and limited trade actions, leaving room for potential negotiations to prevent a larger trade conflict.
- Due to concerns about investor confidence and international relations, China has avoided significant devaluation of its currency in response to tariffs.