Global markets have experienced severe volatility this month as the US president intensifies pressure on international trade partners by imposing or threatening steep tariffs on their goods, citing trade imbalances.
Sweeping Tariffs Take Effect
The latest move saw 25% tariffs on all US aluminium and steel imports come into force at midnight in Washington (0400 GMT Wednesday). The tariffs affect multiple countries, including Brazil, South Korea, and the European Union.
On Tuesday, the US president also threatened to double tariffs on Canada after Ontario imposed an electricity surcharge on three US states. However, the move was reversed after Ontario halted the charge.
The uncertain and shifting nature of US trade policies has heightened market fears, pushing the VIX "fear index" to its highest level since August.
Market Reactions & Economic Concerns
Traders remained largely unmoved by the president's assurances against a recession. Over the weekend, he referred to the current situation as "a period of transition", declining to rule out an economic downturn.
On Tuesday, he stated at the White House:
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"I don't see it at all. I think this country's going to boom… Markets are going to go up and they're going to go down. But you know what, we have to rebuild our country."
However, analysts and investors remain wary. Nicole Inui at HSBC noted:
"The back and forth on tariff announcements is playing havoc with consumer and business confidence… Policy uncertainty is at a record high, consumer confidence has dropped sharply, and small business optimism has declined."
She added that GDP forecasts were revised lower for the first time in eight months, and discussions around a potential recession are increasing.
Stock Market Reactions Across the Globe
Following a selloff in New York, where the Nasdaq extended Monday's 4% drop, Asian markets remained cautious:
- Tokyo, Singapore, Seoul, Jakarta, and Taipei saw modest gains.
- Hong Kong, Shanghai, Wellington, Mumbai, Bangkok, and Manila ended in the red.
- Sydney dropped more than 1%, as concerns grew over the impact of US tariffs on Australia's economy.
Inflation Data and Federal Reserve Response
Markets are also closely watching the release of key US consumer inflation data on Wednesday. The Federal Reserve is expected to analyze the figures as it considers monetary policy adjustments in response to the latest economic developments.
Concerns persist that tariffs, tax cuts, deregulation, and immigration policies could increase inflation, potentially forcing the Fed to maintain or even raise interest rates.
Investors Looking for Stability Outside the US
With rising uncertainty in US markets, investors are shifting focus towards more stable international regions.
Charu Chanana, Chief Investment Strategist at Saxo Markets, commented:
"For years, the US has been the undisputed leader of global markets, driven by aggressive fiscal spending, tech dominance, and strong consumer demand. But cracks are starting to show. Investors are increasingly looking overseas amid concerns over US stock valuations, monetary policy, and economic uncertainty."
Key Market Figures (as of 0700 GMT Wednesday)
- Tokyo – Nikkei 225: UP 0.1% at 36,819.09 (close)
- Hong Kong – Hang Seng Index: DOWN 1.1% at 23,520.71
- Shanghai – Composite: DOWN 0.2% at 3,371.92 (close)
Currency Movements
- Euro/dollar: DOWN to $1.0900 from $1.0915
- Pound/dollar: DOWN to $1.2926 from $1.2954
- Dollar/yen: UP to 148.20 yen from 147.70 yen
- Euro/pound: UP to 84.32 pence from 84.26 pence
Commodities
- West Texas Intermediate (WTI) Crude: UP 0.1% at $66.34 per barrel
- Brent North Sea Crude: UP 0.1% at $69.66 per barrel
Stock Indexes
- New York – Dow: DOWN 1.1% at 41,433.48 points (close)
- London – FTSE 100: DOWN 1.2% at 8,495.99 (close)
Conclusion
With US trade policies in flux, global markets are responding with increased volatility. Investors are growing cautious as tariffs, recession concerns, and inflation fears dominate the economic outlook. The coming weeks will be crucial in determining how markets adjust to these ongoing uncertainties.
