Asia markets slumped on Monday after Donald Trump slapped tariffs on Canada, Mexico and China, sparking fears of another bruising ‘America First’ trade war that could hit global growth.
Japan’s Nikkei plunged more than two percent at one point on Monday and Hong Kong’s Hang Seng was down more than one percent. South Korea’s KOSPI was down more than two percent at one point.
Shanghai was closed for the Lunar New Year holiday. China’s markets will resume trading on Wednesday.
The US dollar soared to a record high against the Chinese yuan.
“Trump’s trade war has started,” Alvin Tan, head of Asia currency strategy at RBC Capital Markets in Singapore told Reuters, noting it was hard to see the dollar retreating any time soon.
Trump announced over the weekend that tariffs will amount to a significant 25% duty on all imports from Mexico and most goods from Canada, and a 10% tariff on Chinese goods imported into the United States.
The tariffs – which Trump says are needed to combat the flow of migrants and fentanyl into the US – are due to come into effect on Tuesday.
Canada and Mexico have announced retaliatory tariffs, and China has said it will challenge the move at the World Trade Organization.
On Sunday evening, Trump also threatened to enact additional tariffs on the European Union — accusing the EU of being “really out of line.”
Trump later said he plans to speak with Canadian Prime Minister Justin Trudeau on Monday morning, less than a day before the US’ tariffs on the country are scheduled to go into effect.
“The surprise for markets … is that Canada and Mexico retaliated immediately and that others, i.e. China and the EU, may follow their lead, resulting in a sharp contraction in global trade,” Tony Sycamore, a market analyst at IG told Reuters.
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