From Tokyo to Wall Street, markets woke up in panic mode after Trump unleashed his first trade war broadside.
Investors scrambled as the White House slapped 25% tariffs on Canada and Mexico, 10% on China, all taking effect Tuesday. The EU isn’t caught in the crossfire just yet, but everyone knows it’s probably next.
A bloodbath
The damage was immediate. S&P 500 and Nasdaq 100 futures tumbled 2%, Japan’s Nikkei 225 slid nearly 3%.
Chip stocks, already rattled by supply chain fears, nosedived —TSMC plunged almost 6%, SK Hynix more than 4%, and Nvidia slumped nearly 5% in overnight trading.
Crypto wasn’t spared either, with Bitcoin to memecoins down sharply.
But the tariffs weren’t the only punch. The White House also shut down the “de minimis” loophole, a favorite of Chinese e-commerce giants, which let packages under $800 enter the US duty-free.
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JD.com and PDD Holdings, Temu’s parent company, both dropped around 4% on the news.
The tariffs also saw the US dollar surging, while every major currency — from the euro and yen to the Mexican peso and Canadian dollar — slid. If you’re not holding greenbacks, inflation just got uglier for you.
Companies with major US exposure took a hammering. Japanese automakers like Mazda, Honda, Nissan and Toyota all dropped more than 5%. Even Indian stocks, with little direct exposure, slipped nearly 1% as investors fled risky assets.
Bigger than 2018 — and by a lot
The numbers behind this trade war round make 2018 look like a warm-up. Trump’s tariffs are projected to rake in $150 billion annually, equivalent to a 10-11% corporate tax hike, according to Strategas Research.
When fully implemented, the China tariff is probably four to five times larger than the last wave, the firm said.
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Deutsche Bank’s global head of FX research, George Saravelos, put it bluntly: this is worse than Brexit for Canada and Mexico. A recession could be weeks away for Trump’s North American neighbors.
“The market needs to structurally and significantly reprice the trade war risk premium,” writes Saravelos.
The “this is chaos” playbook
With this kind of uncertainty, it’s tough to know the long-term winners. The only certainty? Volatility is here to stay.
The ProShares VIX Short-Term Futures ETF ($VIXY) could be worth watching—though this one isn’t for the faint of heart or long-term holding.
The soaring US dollar means government bonds could be a safe-haven move, with the iShares 20+ Year Treasury Bond ETF ($TLT) creeping into the green overnight.
Others are looking overseas — Barclays says Indonesia, India, and the Philippines are better placed than markets like Taiwan, Korea, and Singapore. That’s because they have lesser exposure to the US.
For now, the only certainty is that chaos is back, and the stakes are even higher. Markets aren’t ready for what’s coming.
Edited by Ankush Chibber. If you have any tips, ideas or feedback, please get in touch: talk-to-us@moniify.com
