Stocks retreat, dollar mixed on Trump tariff warning

LONDON: Stock markets retreated and the dollar was mixed on Tuesday after Donald Trump warned he would impose huge new tariffs on China, Mexico and Canada immediately on taking over as US president in January.

Trump said on his Truth Social account that he would hammer the United States’ largest trading partners in response to the illegal drug trade and immigration.The news dampened optimism that his pick to lead the Treasury, Scott Bessent, could temper the tycoon’s assertiveness, with fears that a trade war with China and warnings that the tariffs -- along with promised tax cuts -- will reignite US inflation.

“This was Trump’s most direct assertion about his tariffs plan since winning the election” in early November, noted Kathleen Brooks, research director at XTB trading group.

European stocks followed losses in Asia on Tuesday despite Trump excluding Europe as an immediate target for tariffs.“It is early days, and there are plenty of opportunities for Trump to direct his attention to Europe down the line,” Brooks added.

The dollar rallied against its Canadian equivalent, Mexico’s peso and yuan.However, it dropped against the euro, pound and yen, with the latter benefiting from its status as a haven investment, analysts said.

Ahead of Wall Street’s reopening, the administration of outgoing US President Joe Biden said it has finalised a $7.9-billion award to Intel, cementing part of his legacy in bringing semiconductor production to the United States.

The world’s biggest economy is scrambling to ease its dependence on China and other countries in Asia for these devices essential for everything from refrigerators to weapons systems.Elsewhere Tuesday, bitcoin held above $92,000 despite falling further.

A Trump-fuelled rally that had seen the world’s biggest cryptocurrency surge about 50 per cent to within a whisker of $100,000 has run out of steam.Oil prices rebounded slightly after Monday’s losses of around 3.0 per cent, as Israel’s security cabinet prepared to vote on a proposed ceasefire in its war with Hezbollah in Lebanon.