Global Stock Markets Tumble as Trump’s New Trade War Shakes Investor Confidence – What You Need to Know

Stock markets in Asia and Europe took a hit on Monday after President Donald Trump imposed new tariffs on Canada, Mexico, and China. This has raised worries about the potential for a new trade war that could slow down the global economy.

US stocks are likely to decline, as shown by the drop in stock futures.

“Trade war 2.0 begins,” UBS strategists noted in a report.

Japan’s Nikkei index ended the day down 2.7%, while South Korea’s KOSPI fell by 2.5%. In Hong Kong, the Hang Seng index remained mostly unchanged.

The Shanghai index was closed for the Lunar New Year holiday and will reopen on Wednesday.

Over the weekend, Trump also indicated he might impose tariffs on the European Union, claiming they are “really out of line.”

In Europe, the Stoxx Europe 600 index dropped by 1.4%. Germany’s DAX and France’s CAC both fell 1.9%, and London’s FTSE 100 was down 1.3%.

Mohit Kumar, an economist at Jefferies, explained that tariffs can lead to inflation and slower growth, which do not bode well for stock markets.

Meanwhile, the US dollar reached an all-time high against the Chinese yuan.

Chris Beauchamp, market analyst at IG, pointed out that, for now, the dollar seems to be the only clear winner in this situation.

The new tariffs include a 25% duty on imports from Mexico, most goods from Canada, and an additional 10% on Chinese imports to the US. Trump argues these measures are necessary to address issues like immigration and drug trafficking.

These tariffs are expected to start affecting imports on Tuesday. In response, Canada and Mexico have announced they will impose their own retaliatory tariffs, while China plans to challenge these tariffs at the World Trade Organization.