Markets react to Trump's tariff promise


SINGAPORE (Reuters) -U.S. President-elect Donald Trump said on Monday that on his first day in office he will impose a 25% tariff on all products from Mexico and Canada, and an additional 10% tariff on goods from China.

The announcement sparked a dollar rally. It rose 1% against the Canadian dollar and 2% against the Mexican peso, while share markets in Asia fell, as did European equity futures. S&P 500 futures fell 0.3%.[FRX/][MKTS/GLOB]

Here are reactions from market participants:

NAKA MATSUZAWA, CHIEF MACRO STRATEGIST, NOMURA, TOKYO

“Ten percent across the board (for China) is not as big as the one that he was talking about, 60%. But it still came in a more concrete way, so I think the initial reaction was rather negative.

“If this stops at 10%, it wouldn’t be catastrophic to China’s economy and probably less so for (the economy) globally.”

GARY NG, SENIOR ECONOMIST, NATIXIS, HONG KONG

“It’s definitely a shock to the market and weighing on Chinese assets, especially the export sectors because their corporate profit will be under pressure with these extra tariffs.

“But compared to what he imposed on Canada and Mexico, the magnitude is not that big, so investors might still want to see what are the follow ups and when/if the 60% promised will actually come through.”

SIMON YU, VICE GENERAL MANAGER, PANYAO ASSET MANAGEMENT, SHANGHAI

“Tariffs are Trump’s card in negotiating with other countries.

“China already has a template to deal with tariffs in reference to Trump 1.0. Regarding other clampdowns such as tech-related sanctions, China may accelerate the process of self-reliance and import substitution.”

GEORGE BOUBOURAS, HEAD OF RESEARCH, K2 ASSET MANAGEMENT, MELBOURNE

“Important to reflect that the 25% tariff headlines with China, Mexico and Canada are not policies as yet but a good indication that under a Trump presidency they will no longer tolerate the relocation of export manufacturing from China to the U.S. NAFTA partners by Chinese companies.

“Headlines like this will continue to support a steeper yield curve and stronger USD… as always when it comes to trade, fiscal or monetary policy changes, there will be long and variable lags.”

WILLIAM REINSCH, SENIOR ADVISOR, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES:

“This strikes me more as a threat than anything else.

“I guess the idea is if you keep hitting them in the face, eventually they’ll surrender.

“It didn’t work with China, and I don’t think it’ll work with Mexico and Canada.”



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