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Asian stocks dive as Trump tariffs trigger trade war fears

Asian stocks dive as Trump tariffs trigger trade war fears

Currency dealers work as an electronic board shows the Korean Composite Stock Price Index (KOSPI) and the exchange rate between the U.S. dollar and South Korean won at a dealing room of a bank, in Seoul, South Korea on Dec 9, 2024. (File photo: REUTERS/Kim Kyung-Hoon)

HONG KONG: Asian stocks tanked and the dollar surged on Monday (Feb 3) after Donald Trump signed off huge tariffs on China, Canada and Mexico, and warned the European Union would be hit "pretty soon".

Less than two weeks after moving back into the White House the US president on Saturday made good on warnings that he would resume his hardball tactics, sparking fears of trade wars that could hammer the global economy.

The move will see 25 per cent levies on imports from Canada and Mexico and 10 per cent duties on Chinese goods.

Analysts at Oxford Economics said the tariffs could see Mexican inflation surge to 6 per cent annually, from 4.2 per cent in December, while the peso sank 7 per cent.

Chief EY economist Gregory Daco said Canada's economy could shrink 2.7 per cent this year and 4.3 per cent next year.

White House Press Secretary Karoline Leavitt said tariffs were "promises made and promises kept by the president".

Canada said it would file a World Trade Organization claim against the United States, while Mexican President Claudia Sheinbaum announced that retaliatory tariffs would be imposed on US products.

China's trade ministry said Beijing would take "corresponding countermeasures".

While the decision had been well-flagged, equity markets took a hefty hit, with all three main indexes on Wall Street turning negative at the end of Friday trade after Trump reaffirmed he would impose the tariffs.

In Asia, the Year of the Snake started with a nasty bite.

Tokyo, Seoul and Jakarta each shed more than 2 per cent while Sydney, Bangkok and Wellington were each off more than 1 per cent. Singapore and India also fell, while Hong Kong gave up early deep losses to end only marginally down. Shanghai remained closed for a holiday.

London opened more than 1 per cent lower, while Paris and Frankfurt each lost more than 2 per cent.

INVESTORS "FEEL JOLT"

Taipei plunged more than 3 per cent, with chip titan and market-heavyweight TSMC diving 5.7 per cent on the first trade day since China's DeepSeek unveiled a cheaper artificial intelligence model rivalling those of US tech giants.

"This wasn't a shock - it's been telegraphed for weeks - but investors will still feel the jolt as markets adjust to a move almost universally seen as damaging to global growth and financial stability," said Stephen Innes at SPI Asset Management.

On currency markets the dollar soared 2.3 per cent against the Mexican peso and more than 1 per cent against the Canadian dollar.

It was also sharply higher against the South Korean won, Australian dollar and South African rand.

"We suspect the path of least resistance for now is for Asian currencies and risk assets to weaken, together with a greater risk premia to account for future meaningful tariff moves beyond what we have seen," said Michael Wan at MUFG.

Gold slipped, having hit a fresh record above US$2,800 last week, as the stronger dollar made it more expensive to buy the metal for holders of other currencies.

Trump's latest salvo came at the end of a volatile week for markets following news of DeepSeek's R1 chatbot, which saw some investors re-evaluate their surge into tech giants in recent years as they bet big on the AI revolution.

It also overshadowed healthy earnings results from Apple, which soothed some worries about the tech sector, and data showing that the Federal Reserve's preferred gauge of inflation met forecasts.

Oil prices jumped as Trump's tariffs on Canada and Mexico include the commodity, while Bitcoin dropped more than 5 per cent.

Source: AFP/rc/cm
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