Trump Tariffs Trigger Stock Slump, Dollar Surge on Trade War Fears

Global stock markets faced sharp declines on Monday after U.S. President Donald Trump announced new tariffs on imports from Canada, Mexico, and China. The move has sparked fears of an escalating trade war, leading to a worldwide selloff in equities.

The U.S. government has imposed a 25% tariff on Mexican and Canadian goods and a 10% tariff on Chinese imports. The announcement led to a sharp decline in major stock indexes. European markets fell significantly, with the STOXX 600 index dropping 1.3%, marking its worst day this year. U.S. stock futures also plunged, with the S&P 500 and Nasdaq falling by 1.6%.

The tariffs had an immediate impact on currencies. The U.S. dollar reached a record high against the Chinese yuan, while the Mexican peso and Canadian dollar both tumbled. Investors sought safety in the dollar, fearing increased inflation due to higher import costs.

“People thought, okay, there’s a pro-business president, there’s a pro-business Congress. What could go wrong, right? And I think it’s just a little bit of a shock that he’s trying to do so many things at once,” said Olivier D’Assier, a financial analyst.

Canada and Mexico responded swiftly with retaliatory tariffs. Canadian Prime Minister Justin Trudeau warned that American consumers would feel the impact. Mexican President Claudia Sheinbaum also ordered new tariffs on U.S. goods.

In Asia, Japan’s Nikkei fell nearly 3%, while Australia’s stock market dropped 1.8%. Hong Kong markets remained flat as they reopened after the Lunar New Year holiday, while mainland China remained closed.

Economists warn that these tariffs could have long-term consequences. Analysts predict slower economic growth, higher inflation, and potential recessions in Canada and Mexico. Some experts believe this could push the U.S. into stagflation, where inflation rises while economic growth slows.

With markets reacting negatively, investors remain uncertain about the future. Analysts expect continued volatility as tensions between the U.S. and its trading partners escalate. Many now await further policy announcements from the Trump administration, which could determine whether this is the start of a prolonged trade war.