Global Shares Slip as Trump's Tariffs Spark Worries

The global stock market took a hit today as investors grappled with the fallout from President Donald Trump's decision to impose sweeping tariffs on Canada, Mexico, and China. U.S. stock futures slumped in early Asian hours, with Nasdaq futures down 2.35% and S&P 500 futures 1.8% lower. Canadian Prime Minister Justin Trudeau announced plans for retaliatory tariffs on imports of goods from the United States, while Mexico's president, Claudia Sheinbaum, said she will spell out details of its response on Monday. China also said it would take "countermeasures."



The White House has not yet published all the details of the tariff plan, leaving questions about their impact and duration. Some analysts continued to game out the chances that last-minute negotiations could delay or avoid them altogether. However, the uncertainty over how and for how long the tariffs will be wielded brought fresh upset for markets that were dealt a blow last week as the emergence of China's DeepSeek AI model hit tech stocks.

Trump's unspecified "pain" could come in the form of lower U.S. corporate profits and more inflation, potentially upending U.S. interest rate cut expectations, and further weakening currencies such as the Canadian dollar and China's yuan. "Until now the market has really been on Trump's side, but that could change and the market could challenge him for the first time," said Mark Malek, chief investment officer at Siebert Financial in New York.

In three executive orders, Trump imposed 25% tariffs on Mexican and most Canadian imports and 10% on goods from China, starting on Tuesday. Canada said it will respond with 25% tariffs against $155 billion of U.S. goods, beginning with $30 billion taking effect Tuesday and $125 billion 21 days later. "It's negative for CAD, MXN and CNH, as well as overall risk," Nick Twidale, chief market analyst at ATFX Global in Sydney said referring to the Canadian, Mexican, and Chinese currencies.



Analysts are also preparing for a selloff in stocks and other higher-risk assets. If tariffs are imposed and look set to stick around, possibly for months, "stocks should sell off although sector sensitivity would vary" Morgan Stanley researchers said in a note. With the S&P 500 near all-time highs, the index could move 3% to 5% in either direction in the short term, Evercore ISI strategists said in a note.

Barclays strategists previously estimated that the tariffs could create a 2.8% drag on S&P 500 company earnings, including the projected fallout from retaliatory measures from the targeted countries. Goldman Sachs economists have estimated that across-the-board tariffs on Canada and Mexico would imply a 0.7% increase in core inflation and a 0.4% hit to gross domestic product.

The potential to drive up consumer prices is a particularly sensitive area for investors, who are worried about a revival in inflation causing the Federal Reserve to stop cutting rates. The Fed last week paused its rate-cutting cycle, while Fed Chair Jerome Powell said officials were "waiting to see what policies are enacted" with the new president.

European Central Bank policymaker Klaas Knot said on Sunday he expects new tariffs will lead to higher inflation and interest rates in the U.S. that will likely weaken the euro. Assuming tariffs contribute to a surge in inflation, the U.S. central bank is less likely to enact the interest rate cuts markets broadly see as catalyzing growth, Capital Economics Chief North America economist Paul Ashworth said in a note.

As investors navigate the volatile market landscape, it's crucial to stay informed and adapt to the changing dynamics. Diversifying portfolios, hedging against risks, and monitoring market developments can help investors position themselves to capitalize on potential opportunities while mitigating the impact of geopolitical tensions and market volatility.