Stephen Innes
SPI Asset Management
The dollar jumped, and Asia equity markets quaked under President-elect Donald Trump's bombshell announcement: the US is set to punish new tariffs on imports from China, Mexico, and Canada. In starkly displaying his "America First" doctrine, Trump's hardline approach sent shockwaves through the financial world, causing Asia’s benchmark equity index to plummet by 1% and casting a dark shadow over the European market's opening. Justifying his move on his Truth Social Network, Trump declared these hefty tariffs—10% on Chinese goods and a staggering 25% on all products from Mexico and Canada—essential to clamp down on illegal immigration and drug trafficking, stirring a maelstrom of investor anxiety as markets braced for turbulence.
The Peso, Loonie and Yuan are feeling the Tariff Man heat today. Although it’s easy on paper to dismiss this as a bold negotiation play before his January 20th inauguration, the actual implications for the forex markets are profound. Underestimating the fallout could be a costly misstep as this aggressive tactic sends shockwaves through global currency markets, potentially triggering a new era of volatility.
Despite the tremors, the reaction among G-10 dollar bulls, especially within the EURUSD trading pits, was notably subdued. This lukewarm response might indicate overstretched long USD positions and the realization that there’s still a winding road to January's inauguration. Today's upheaval in the markets could be the precursor to a series of volatile, bombastic outbursts from Trump on social media as he gears up for office. Investors, strap in—this could be just the beginning of a rollercoaster ride through a storm-laden landscape of global finance in the coming weeks.
The bond market has maintained a relatively calm demeanour, buoyed by enduring confidence in Bessent's '3 Rs' policy framework. Bond traders see the latest developments as strategic maneuvers essential for clamping down on illegal immigration, compelling Mexico to curb the flow of fentanyl, and pressuring China to halt the export of precursor chemicals. This perspective sees the heightened rhetoric as a tactical play vital for addressing significant cross-border issues, not necessarily the start of a trade war. Trust me, we will know when that happens !!
SPI Asset Management provides forex, commodities, and global indices analysis, in a timely and accurate fashion on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors.
Our publications are for general information purposes only. It is not investment advice or a solicitation to buy or sell securities.
Opinions are the authors — not necessarily SPI Asset Management its officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.
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