Global Markets Volatile as Trump Returns to White House
Global markets were volatile on Tuesday as Donald Trump returned to the White House, with the dollar rebounding in choppy trading. Trump did not immediately impose tariffs on Monday as previously promised, but said he was considering imposing 25% duties on imports from Canada and Mexico on February 1 over illegal immigrants and fentanyl crossing into the U.S.
The Mexican peso and Canadian dollar fell against the greenback, while European shares dipped in early trade and U.S. stock futures were firmer. Investors and analysts were divided on the implications of Trump’s move, with some seeing it as a sign of pragmatism and others as a sign of uncertainty.
“I think this is typical of what we’re going to see: there’s a lot of rhetoric and talk about policies or upcoming policies, or policy intentions,” said Thomas Urano, co-chief investment officer at Sage Advisory. “Post-election, the bond market built a lot of anxiety and concern over Trump policy causing a re-acceleration of inflation.”
Helen Given, FX trader at Monex USA, said volatility was back in a big way, and traders were trying to get ahead of the risk of tariffs on Mexico and Canada. “The lack of a deadline on tariffs against China is weighing on the U.S. dollar a bit, and we could see some downside for the Buck until more concrete actions are announced,” she said.
Walter Todd, chief investment officer at Greenwood Capital, said the lack of specificity on tariffs was a surprise, and rates and the dollar were down as a result. “I think there was an expectation that he was just going to do an executive order and hit it hard and he didn’t,” he said.
Jason Drahos, head of asset allocation Americas at UBS Global Wealth Management, said Trump’s decision to study trade policies rather than imposing tariffs was a positive sign. “It’s only the first day, but that decision supports our view that Trump 2.0 policies will ultimately favor DOGE over MAGA economic ideologies,” he said.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said the U.S. economy would likely continue to grow despite tariffs, and inflation would likely continue to fall. “Our base case for the U.S. economy is for ‘growth despite tariffs’,” he said.
Amelie Derambure, senior multi-asset manager at Amundi, said markets would try to anticipate and dissect which sectors and areas would be targeted by tariffs, leading to volatility. “European assets, especially equities, will be volatile because tariff news will be especially important for Europe,” she said.
Jim Reid, global head of macro strategy at Deutsche Bank, said a lack of immediate moves on tariffs supported the market mood, but the renewed threat of tariffs on Canada and Mexico could lead to more volatility. “It’s Trump’s world and we are all just living in it – and the markets are going to have to get used to that again,” said Kyle Rodda, senior markets analyst at Capital.com.
Charles Wang, chairman of Shenzhen Dragon Pacific Capital Management Co, said Trump was now more pragmatic towards China. “I think Trump is now more pragmatic toward China,” he said.
Kiyoung Seong, lead Asia macro strategist at Societe Generale, said while there was no immediate tariff imposed on China, the initiation of tariffs on Canada and Mexico made it unlikely that Trump would alter his plan regarding tariffs on China. “A potential delay in the imposition of tariffs on China could also lead Chinese authorities to abstain from implementing a definitive stimulus,” he said.
Shoki Omori, chief global desk strategist at Mizuho Securities, said the 25% tariff proposal was high as a starter, and markets reacted quickly, especially in FX. “I think market participants thought Trump would start with China, with say a 10%-20% tariff on goods but gradual increase,” he said.
Charu Chanana, chief investment strategist at Saxo, said the first few hours of Trump’s administration had underscored that policy environment would be dynamic once again, and markets should brace for volatility. “The absence of any threats on China has kept the hopes of a negotiation alive there, especially after the Trump-Xi phone call last week,” she said.
Andrew Swan, portfolio manager at Man GLG, said he expected a resolution between the U.S. and China from an economic point of view, which would be positive for Asia. “I’ll say one positive surprise we may see this year is actually some sort of resolution between U.S. and China from an economic point of view, not a strategic point of view,” he said.
Vis Nayar, chief investment officer at Eastspring Investments, said tariffs were an overhang, and there was hope that there was some pragmatism. “I think we should expect volatility,” he said.