In London on February 7th, Reuters reports that the U.S. President's ability to impose and subsequently delay tariffs on major trading partners has caused global markets to fluctuate unpredictably.
Over the past week, the President initially declared significant tariffs on Canada, Mexico, and China, only to announce one-month delays for Canada and Mexico shortly afterward.
This erratic behavior reflects the ongoing risk of a worldwide trade conflict that could harm economic growth and lead to inflation.
According to Tina Fordham, founder and geopolitical strategist at Fordham Global Foresight, The warning shot fired by the White House has left the global community puzzled.
The uncertain trade environment has particularly impacted currencies such as Canada's dollar, which hit 20-year lows before recovering due to the temporary tariff postponements.
However, concerns persist as the possibility of 25% tariffs remains, potentially prompting Canada to continue on a path of rate cuts to manage uncertainty.
Similarly, Mexico has been experiencing currency fluctuations since last year, with the peso reacting to tariff threats by both falling and rising this year.
Analysts predict that Mexico may face an economic downturn if hit with 25% tariffs, potentially causing the peso to weaken further.
The euro has also faced pressure due to tariff discussions, declining since the U.S. election and being forecasted to potentially reach $1 within a year.
While Europe faces the risk of becoming entangled in a U.S.-China trade conflict, analysts such as George Saravelos warn of a potential influx of Chinese goods into Europe should they be blocked from entering the U.S.
The auto industry, already strained by trade uncertainties, could suffer significant losses if prolonged tariffs are imposed on Mexico and Canada, affecting companies like Stellantis, Volkswagen, and others.
In the ongoing U.S.-China trade tensions, China has shown restraint, with the yuan holding steady and limited reactions to U.S. tariffs, leaving room for a potential trade agreement between Washington and Beijing to mitigate further disruptions.
Despite earlier threats, current U.S. tariffs on China are below the levels initially proposed by President Trump, and China has refrained from devaluing the yuan significantly to avoid negative impacts on investor confidence and international relations.