Donald Trump rattled markets on Tuesday after he threatened to slap a 10 per cent additional tax on imports from China and 25 per cent on goods from Canada and Mexico, sending a frisson of fear over the break out of an imminent global trade war in which there would be no winners.
The US President-elect shook markets with his first specific threats directed at the country’s top trading partners since winning the election three weeks ago.
The threats were announced in posts to his Truth Social network on Monday – and the reverberations were felt in the stock and bond markets on Tuesday.
“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” the president-elect wrote.
The new tariff pledges sent out a clear signal that Trump plans to rewrite the North American free trade pact and subdue China with tariffs that are certain to rekindle confrontation over a rules-based global trading system.
The dollar rallied while European shares traded in negative territory after Asia-Pacific markets saw their main indices slide in an immediate reaction to Trump’s threats.
“It was just last month that Trump said that ‘the most beautiful word in the dictionary is tariff’; so there really should not have been a surprise in Trump’s intention, just in the timing of the comments,” said Sean Callow, a senior FX analyst at ITC Markets.
The Mexican peso and Canadian dollar came under pressure, while the euro shrugged off earlier weakness.
Domestic equities stumbled with the benchmark indices dragged down by worries over Trump’s threats and eddying concerns over whether the Adani bribery scandal would sap the enthusiasm of foreign funds to plow money into Indian equities.
In a volatile session, the Sensex lost 105.79 points, or 0.13 per cent, to close at 80,004.06.
Earlier in the day, it had hit a high of 80,482.36 before a steep fall to 79,798.67.
At the NSE, the broader Nifty slipped 27.40 points to end at 24,194.50.
Market mavens said investor sentiment was crushed by a stream of negative news relating to the Adani group after the indictment of Gautam Adani and his nephew Sagar Adani in the US.
However, there was one bright spot for the markets as provisional data showed that the foreign institutional investors (FIIs) were net buyers for the second consecutive session. They purchased stocks worth ₹1,158 crore in Tuesday’s trade.
The Adani group stocks were pounded again with Adani Green Energy – at the centre of the bribery controversy – plunging 7.05 per cent to ₹899.40 while the group’s flagship Adani Enterprises slid 4.78 per cent to ₹2149.80.
