Global stock markets were volatile on Tuesday as investors grappled with the uncertainties surrounding US President Donald Trump's tariff plans.
In his inaugural address, Trump refrained from unveiling new import taxes on his first day in office; however, he indicated that new tariffs on Mexico and Canada might be implemented on 1 February.
Stocks in Europe initially rose before retreating, while Asian markets experienced moderate gains.
Trump has outlined an ambitious agenda encompassing trade reforms, tax reductions, and regulatory cuts, which could potentially enhance corporate profits. Yet, some economists caution that these strategies might fuel inflation, prompting the Federal Reserve to raise interest rates.
Following the inauguration, the dollar, which had weakened, rebounded against major currencies like the pound and the euro.
Although Trump had threatened tariffs on Canada, Mexico, and China on his first day as president, these tariffs were not imposed; nevertheless, they remain under consideration.
In his Oval Office comments, Trump alluded to possible 25% tariffs on Mexico and Canada due to security and drug trafficking concerns. He authorized federal agencies to investigate factors behind the US importing more than exporting and to examine potential trade injustices and currency manipulation by other nations.
Regarding China, Trump suggested that new tariffs might hinge on the outcome of negotiations surrounding TikTok's future. He asserted that failure to reach an amicable agreement could be interpreted as a hostile act by Beijing.
Despite his campaign promises of significant tariffs, Trump noted that the US is not yet prepared to enforce tariffs on all imports.
Market reactions varied, with Hong Kong and Japan's stocks recording gains, while London and Paris showed stability at midday. US futures indicated a positive market opening following the closure on Monday for Martin Luther King Jr. Day.
Moreover, fluctuations in currency markets were observed as discussions of levies on Canada and Mexico weakened their currencies. On the commodities front, oil prices dipped due to potential oversupply, whereas Bitcoin values surged following Trump's supportive comments on cryptocurrencies.
Amid these developments, analysts highlighted market unease stemming from Trump's executive orders concerning tariffs, emphasizing that his administration's policies could introduce market volatility.
Judy Shelton, a Trump adviser, emphasized the administration's focus on revitalizing the private sector through economic liberty, lower taxes, and reduced regulation. She views tariffs as an effective negotiation tool, particularly regarding immigration issues with neighboring countries like Mexico and Canada.
Shelton argued that tariffs may not necessarily lead to inflation for Americans, suggesting that consumers might opt for domestically produced goods rather than paying higher prices for imports.