Tuesday 3/4/2024 - As new U.S. tariffs on China, Mexico, and Canada went into effect, stocks all throughout Asia fell on Tuesday under wary investor movement. The new trade policies generate more worries regarding a possible rise in world economic tensions.
While crude oil held close to 12-week lows, the risk-sensitive Australian dollar slumped. Originally rising to around $95,000 earlier in the week, Bitcoin battled about $86,000 after pulling back significantly.
The British pound stayed close to a six-week high while the euro held firm as European leaders worked on a peace proposal for Ukraine to show to Washington.
Reactions in Asian Markets
The Nikkei index of Japan sank 1.6%; the benchmark for Taiwan dropped 0.5%). The Hang Seng slid 0.4% in Hong Kong and the blue-chip equities of China sank 0.2%. The S&P 500 plummeted 1.8% and the tech-heavy Nasdaq sank 2.6% following Wall Street's worst day of the year.
U.S. futures, on the other hand, showed a meager comeback of roughly 0.2%, implying that the sell-off would calm later on in the world trade day. Conversely, Europe was destined for a smaller open with STOXX 50 futures indicating 0.8% lower.
Tariffs from the United States and Economic Issues
After President Donald Trump revealed that a 25% duty on Canadian and Mexican imports would take effect early Tuesday coupled with a tariff increase on Chinese goods from 10% to 20%, investor mood worsened.
After a run of poor U.S. economic statistics, markets were already on edge; worries grew after new numbers revealed factory gate prices soaring to almost three-year high. Delays in material supplies also suggested possible manufacturing slowdowns brought on by the additional import taxes.
Asian markets reduced some of their losses despite the initial market shock since traders saw comfort in a very restrained reaction from Trump's trade partners. Although China, Canada, and Mexico all declared retaliatory tariffs, their responses were perceived as under control rather than forceful.
Expert Views and Money Movement Strategies
" Higher tariffs on Chinese goods could actually harm the U.S. more, as it depends on cheaper Chinese imports to keep inflation in control," said Shanghai Zhuozhu Investment Management partner Wang Zhuo. He said that although China's countermeasures would hurt U.S. agriculture exports, the reaction is probably more symbolic than aggressive to help to prevent additional raising of hostilities.
Following the tariff news, the Canadian dollar and Mexican peso lost value; the Australian dollar dropped to a one-month low. China's yuan did, however, somewhat rebound in offshore trade as the People's Bank of China kept steering the currency higher via official exchange rate changes.
After rebounding 1.1% on Monday, the euro stayed same at $1.0484; the British pound stayed constant at $1.2697 following 1% increase in the last session.
Bonds, Bitcoin, and Commodities U.S. Treasury yields slumped; the 10-year yield dropped to 4.115%, its lowest level since October.
As excitement about a possible U.S. cryptocurrency reserve scheme waned, Bitcoin sold at $84, 220. In a social media tweet just one day earlier, Trump had inspired hope by referencing five tokens—including Bitcoin.
Gold slipped 0.2% to $2,889 per ounce.
Following a 2% decline on Monday amid rumors that OPEC+ is keeping to its plan to boost output in April, oil prices kept sliding. U.S. West Texas Intermediate (WTI) crude sank 0.7% to $67.87 per barrel; Brent crude futures dropped 0.9% to $70.97 per barrel.