Dollar jumps after Trump's tariff plans. Shares are jittery.

The global markets welcomed Donald Trump's new presidency on Tuesday with apprehension, largely due to the headlines about his plans for trade and tariffs.

The U.S. market was closed on Monday for a holiday, so the reactions to Trump’s return to the White House began to be felt in Asian trading on Tuesday. European futures were also pointing towards a lower opening.

Investors cheered the possible delay of Trump's tariffs after a brief mention in his inauguration address, but the U.S. President said shortly afterwards that he is considering imposing 25% tariffs against Mexico and Canada by as early as February 1.

The Mexican peso fell 1% versus the US dollar, while the Canadian Dollar plummeted to its lowest level in five years at C$1.4515.

Trump said that he also wanted to reduce the U.S. deficit in trade with the European Union. He suggested tariffs, or increasing energy exports.

After Trump revoked an executive order from his predecessor signed in 2021 that sought to make sure half of new vehicles sold in America by 2030 are electric, the focus will now be on European automakers.

Trump's comments on tariffs quickly reversed gains made by global stock markets, and the dollar rose strongly in all areas of trade.

Charu Chanana is Saxo's Chief Investment Strategist. She said: "The first hours of Trump's administration have shown that the policy climate will be dynamic and the markets should prepare for volatility."

The markets have celebrated too early, as tariff threats were not mentioned in Trump's first inaugural address.

The U.S. Stock Futures have pared back their gains made earlier in the day, with Nasdaq futures remaining flat and S&P futures up 0.1%.

Japan's Nikkei also fluctuated between losses and gains, and ended the day up by 0.13%.

Trump's plans to impose hefty tariffs on imports has been a major focus of the financial markets, as they believe that these policies will ignite inflation and run up the U.S. economic system again. This would boost the dollar while hurting bonds.

Investors had anticipated a rapid imposition of tariffs as soon as he assumed office. The lack of concrete actions initially sparked an initial relief rally in stocks and U.S. Treasuries.

"We are certain that Trump's tariff measures will begin to be implemented at some point." Khoon Goh is the head of Asia Research at ANZ. He said: "It's very clear what Trump wants."

The fact that he didn't address this issue on the first day doesn't mean it's off his agenda. The agenda is set, but we'll have to see how he goes about it.

The 10-year U.S. Treasury benchmark yield last fell 7.1 basis points to 4.54%. Bond prices and yields are inversely related.

The dollar recovered its earlier session losses and moved away from a 2-week low.

The euro fell 0.3% to $1.0385, while the pound sterling fell 0.32% to $1.2290.

What's next?

Stocks in China were volatile, as investors tried to understand how Trump's tariff plans could affect the second largest economy on earth.

The markets are treading cautiously despite his threats of tariffs up to 60% for imports from China.

The CSI300 blue chip index traded 0.13% higher last trade, while the Shanghai Composite Index declined 0.08%.

Hong Kong's Hang Seng Index performed better, increasing by 0.79%.

This helped to lift MSCI’s broadest Asia-Pacific share index outside Japan by 0.34%.

"It is a good thing that we didn't mention tariffs against China. This gave us a boost in sentiment, and so the initial spike was seen across the board. However, this will also leave investors guessing. "It will remain an issue," said Kenny Ng Securities Strategist at China Everbright Securities International.

The onshore yuan maintained some of its overnight gains, and stood last at $7.2781 per US dollar. Its offshore counterpart slipped 0.2% to $7.2801.

Trump's new cryptocurrency token lost some of its gains on Tuesday, falling 20% to $35.27. It had soared up to more than $10 Billion in market value when the week began.

Bitcoin fell 0.08%, to $102,460.68. It is now a little lower than the record high set on Monday.

After Trump's election win in November, the prospect of looser crypto regulations under his administration was met with excitement by the industry. This fueled a rally for digital assets.

Oil prices in commodities were not much changed, as investors digested Trump’s plan to maximize U.S. production of oil and natural gas by declaring an emergency.

Brent crude futures remained flat at $80.1 per barrel, close to its lowest price in over a week. U.S. West Texas Intermediate Crude Futures dropped 0.8% from Friday's closing price to $77.24 a barrel. Due to the U.S. holiday, there was no settlement Monday.

(source: Reuters)