Canada·Mexico Tariffs…Trump's Global Black Monday

Simultaneous Decline in Asia, Europe, and U.S. Stock Index Futures

Dollar Surges as Euro Plummets, Approaching Euro-Dollar Parity

Bloomberg: "Worst Protectionist Act in a Century Causes Market Tension"

The shock from Trump's tariff announcement, combined with the ongoing Deep Sea shock, has led to a global stock market crash, affecting Asia, Europe, and U.S. futures markets.

According to foreign media on the 3rd (local time), after President Trump threatened to impose punitive tariffs on Canada, Mexico, and China starting from the 4th, and also targeted the Eurozone, stock index futures markets in Asia, Europe, and the U.S. all fell simultaneously.

The Asia-Pacific stock index plummeted by 2.3%, the largest drop in six months, while Europe's Stoxx 600 fell by 1.4%.

The sharp decline in Asian stock markets was due to Trump's tariff mentions on semiconductors and steel from not only China but also South Korea, Taiwan, and Japan. Semiconductor companies like Taiwan's TSMC and South Korea's SK Hynix and Samsung Electronics were doubly hit by the Deep Sea shock.

Global car manufacturers exporting cars to the U.S. through Canada and Mexico also saw their stock prices fall, with Europe's automotive index plunging by 3.5%.

Trump's tariff bomb was not only directed outside the U.S.

Due to concerns over tariff enforcement, U.S. stock index futures also fell significantly, surpassing the shock of last Monday's Deep Sea shock.

In the early morning hours of Eastern U.S. time, S&P 500 futures dropped by 1.8%, Nasdaq futures by 2%, and Dow Jones Industrial Average futures by 1.5%.

Additionally, the value of the dollar surged by 1% against major currencies. With Trump's mention of definitely imposing tariffs on EU goods, the euro fell by 1.3% to $1.0231, nearing the dollar-euro parity of 1 euro = 1 dollar.

The Canadian dollar showed its weakest performance in 22 years since 2003. Emerging market currencies like the Mexican peso and Indian rupee also fell.

Concerns that the tariff implementation would exacerbate U.S. inflation pressure led to the 2-year U.S. Treasury yield reaching 4.274%, the highest level in two years.

Bitcoin also plummeted by 2.6% to $94,455.79, while Ethereum fell by 11% to $2,582.35.

West Texas Intermediate (WTI) crude oil for March delivery rose by 2% in just one day.

In 2023, the U.S. imported 4.42 million barrels of oil per day from Canada and 910,000 barrels per day from Mexico, accounting for 52% and 11% of U.S. oil imports, respectively. Despite Trump's initial reduction of tariffs on Canadian energy from 25% to 10%, WTI prices continued to rise.

Bloomberg stated that this rapid escalation of tension is "the impact of the most extensive protectionist act taken by a U.S. president in almost a century."

Analysts at the UK's Matrix Trade noted, "The vague hope that Trump would use tariffs as a negotiation card and not actually implement them has faded." Trump used tariffs as a negotiation strategy with Colombia and withdrew them once Colombia agreed to his demands.

Trump announced on the 3rd that he would hold talks with Canada and Mexico. There is a possibility of reaching an agreement by pressuring Canada and Mexico. However, if these two countries insist on demands that are difficult to accept, tariffs will be implemented from February 4th.

Stephen Englander, Global Head of G-10 FX Research at Standard Chartered, said in an interview with Bloomberg TV, "Trump is like a poker player betting all his assets on the first hand," pointing out that the market was unprepared for this.

The Chinese mainland stock market will reopen on Wednesday. The Wall Street Journal reported that China is eager to negotiate trade with the U.S. and is preparing to prevent tariff increases and technology export restrictions.

Canadian Prime Minister Justin Trudeau announced a 25% countervailing tariff on U.S. products, and Mexican President Claudia Sheinbaum also promised retaliatory tariffs.

Carl Shamota, Chief Market Strategist at Cope in Toronto, said, "If participants start taking the president seriously, the financial markets will undergo a painful adjustment in the coming weeks."

Guest reporter Kim Jung-ah kja@hankyung.com