By Suzanne McGee, Saeed Azhar, Tom Westbrook and Marc Jones
LONDON/SINGAPORE/NEW YORK (Reuters) -The only certainty about Donald Trump’s second U.S. Presidency looked to be uncertainty for investors, after he went easier than expected on China in his first day back in the job but then warned Mexico and Canada they faced 25% tariffs from next month.
Chinese markets were relieved after Beijing avoided an instant blizzard of executive orders but Mexico’s peso and Canada’s dollar weren’t so lucky as Trump’s off-the-cuff talk about tariffs on both countries from Feb. 1 ensured their currencies both took a tumble. [/FRX]
After his inauguration on Monday, Trump also floated the idea of universal tariffs, but said the U.S. was not ready for that yet.
“Uncertainty has been the name of the game since the election result,” said Michael Reynolds, vice president of investment strategy at Glenmede. “The rubber is now starting to hit the road, we’re getting more certainty but not complete certainty yet,” he said.
The dollar rallied on Tuesday after plunging during the inauguration, with the tariff warning pushing it to a five-year high against its Canadian counterpart, a rebound that also pushed the euro and pound down in Europe. [MKTS/GLOB][FRX/]
Wall Street’s first reaction, having been closed for a public holiday on Monday, was a 0.5% rise on the S&P 500 as traders stuck to the view the returning president’s “America first” mantra would boost corporate profits. [.N]
Trump also said he wanted to reverse the U.S. trade deficit with the European Union, either with tariffs or more energy exports.
Mexico and Canada are the most exposed though. The United States imported around $475 billion worth of goods from the former and $418 billion from the latter last year.
Nigel Green, CEO of the deVere financial advisory group, said that was 30% of all U.S. imports, meaning the consequences of 25% tariffs “could be seismic”.
Asian investors saw China’s yuan and Hong Kong shares push higher on Tuesday. Battery and wind energy stocks dropped though after Trump confirmed he was reversing green energy policies and pulling the U.S. out of the Paris climate accord.
One of JPMorgan’s top bankers told a panel at the Davos World Economic Forum that her colleagues have set up a “war room” and had worked through the night to be on top of Trump’s moves.
“The last 24 hours are showing that there’s going to be a lot of changes that we all have to digest,” Mary Callahan Erdoes, the bank’s head of asset and wealth management, said.
