Michelle ThompsonStock markets in the Asia-Pacific region reversed early gains after President Donald Trump indicated he may impose new tariffs on Mexico and Canada.
Shares initially rose following Trump’s promise in his inaugural address to usher in a new “golden age” for America, with plans for trade reforms, tax cuts, and regulatory reductions potentially boosting corporate profits.
However, some economists cautioned that these measures could lead to higher inflation, which might prompt the Federal Reserve to raise interest rates. “We’re thinking in terms of 25 percent on Mexico and Canada, because they’re allowing vast numbers of people — Canada’s a very bad abuser also — vast numbers of people to come in, and fentanyl to come in,” Trump stated in the Oval Office.
During his campaign, Trump also proposed a 10% tariff on all imports to the US and a 60% import tax on China.
Trump has argued that tariffs will enrich Americans, although critics warn that the costs may ultimately be passed on to consumers.
Additionally, the President mentioned plans to establish an “External Revenue Service” to collect tariffs, duties, and revenues from foreign sources.
On Tuesday morning, Japan’s Nikkei 225 index was up by 0.1%, South Korea’s Kospi was down by 0.1%, and Australia’s ASX 200 rose by about 0.6%.
The dollar regained some strength against other major currencies, including the pound and the euro.
“Market sentiment took a hit during President Trump’s signing of executive orders in the Oval Office,” said Tim Waterer, chief market analyst at financial services firm KCM Trade. “Investors got more detailed information about Trump’s tariff agenda, which somewhat dampened the market mood.”
US markets were closed on Monday for the Martin Luther King Jr. Day holiday.
