The U.S. dollar surged on Tuesday, while European stocks suffered sharp declines. President-elect Donald Trump vowed to impose tariffs on all imports from Canada and Mexico and take additional measures against China. European equities, particularly automakers like Volkswagen and Stellantis, took a hit as investors anticipated broader trade tensions. Meanwhile, the Mexican peso and Canadian dollar weakened sharply, reflecting market unease over the proposed 25% tariffs.
The announcement reversed earlier optimism spurred by Trump’s nomination of Wall Street-friendly Scott Bessent as Treasury Secretary, which had bolstered U.S. stocks and bonds on Monday. The small-cap Russell 2000 reached a record high, but the tariff news undermined this positive sentiment. Analysts speculated the European Union could be next in Trump’s trade crosshairs, driving further pressure on European markets and currencies.
In currency markets, the dollar surged 1.7% against the peso and 1% against the Canadian dollar, reflecting fears that Mexico would face the brunt of the tariffs. Asian markets also saw declines, led by Japanese exporters, while Chinese stocks were relatively steady as the proposed tariffs on China were less severe than initially expected. The news underscored the potential volatility of Trump’s economic policies as he prepares to take office.
