Mexico and Canada on hold, while tariffs against China begin today: how global markets react
Kyiv • UNN
The US imposed 10% tariffs on Chinese imports, Beijing responded with restrictions on American goods. Canada and Mexico received a 30-day deferral, and exchanges reacted with a sharp drop in shares of Asian companies.
Since February 4, new 10% tariffs on all imports from China, introduced by President Donald Trump, have come into effect in the US. At the same time, Beijing introduced a 10% tariff on oil and agricultural machinery imports, as well as a 15% tariff on coal and liquefied natural gas (LNG) supplies from the US, writes UNN.
China launched an antitrust investigation against Google and added American companies PVH Corp (owner of the Calvin Klein brand) and biotechnology company Illumina to the list of potential sanctions.
In addition, Chinese authorities announced export controls on a number of metals, including tungsten, which is critical for the production of electronics, military equipment, and solar panels.
These tariffs will come into effect on February 10, giving Washington and Beijing a few more days for possible negotiations.
Why is China acting cautiously?
The total volume of Chinese tariffs will affect approximately $20 billion of American exports. For comparison, the new US tariffs affect Chinese goods imports worth $450 billion. Analysts note that such actions by Beijing are more a signal to the US than an attempt to cause serious damage to American exports.
"These measures are quite restrained, especially compared to US actions, and they are designed to send a signal to the US," commented Julian Evans-Pritchard, head of China economics at Capital Economics, an analytical company.
US neighbors got a reprieve
While tariffs on Chinese imports have already been introduced, tariffs on goods from Mexico and Canada have been suspended.
Earlier, Trump agreed to a 30-day pause on 25% tariffs on imports from these countries. This decision was made after concessions from Ottawa and Mexico City in the area of border control and crime fighting. Canada promised to strengthen border control with the US, introduce new technologies and additional staff to counter illegal migration, fentanyl smuggling, and money laundering.
In turn, Mexico agreed to send 10,000 national guardsmen to its northern border to limit the flow of illegal migrants and drugs.
Trump called these concessions a "significant achievement" and stated that his main priority remains the safety of Americans.
What's next?
A conversation between Trump and Chinese leader Xi Jinping is expected soon. Beijing, despite the measures introduced, leaves room for negotiations. At the same time, Trump has already stated that he is ready to increase tariffs if China does not stop the flow of fentanyl to the US.
Meanwhile, in Europe, preparations are also underway for possible tariff wars. The US President hinted that the EU could become his next target for economic pressure, although he has not yet specified details.
European Commission President Ursula von der Leyen, following an informal summit of EU leaders in Brussels, stated that the EU would give a decisive response if the US introduced tariffs on European goods.
How markets are reacting to Trump's new tariffs
The Canadian dollar and Mexican peso sharply lost value as investors assessed the consequences for major US trading partners.
The Canadian currency came under pressure, losing 1.4%, which was its lowest level since 2003.
The Mexican peso depreciated by more than 2%, and the euro also fell by 1%.
On Asian exchanges, shares of major car manufacturers, electronics, and semiconductor companies sharply fell.
Japan's Toyota, Honda, and Nissan lost more than 5% due to risks to production in Mexico. South Korean automaker Kia fell by 5%, and Chinese companies XPeng and Li Auto, which are expanding their presence in the US, lost more than 6% in Hong Kong.
The new tariffs also hit Chinese e-commerce platforms, as the Trump administration canceled tax breaks for packages worth up to $800.
This led to a fall in shares of companies producing small durable goods, including sportswear manufacturer Li Ning (-7%) and home appliance manufacturer Haier Smart Home (-7%).
Shares of Asian microchip manufacturers also suffered losses. The largest chip exporters, such as Taiwan Semiconductor Manufacturing Co. and Samsung Electronics, came under pressure after Trump's statement about the possible introduction of a tax on semiconductor imports.
In Japan, shares of semiconductor equipment manufacturers Tokyo Electron, Advantest, and Disco fell by at least 2%.
Currency exchange rate as of February 4: hryvnia slightly devalued04.02.25, 09:19 • 27728 views
Some Asian companies may benefit from the new tariffs. In particular, oil refineries, such as S-Oil, could potentially gain due to the rising cost of oil from Canada and Mexico, giving them an advantage over American competitors.
Trump's trade policy also hit Taiwanese and Indian companies with production in Mexico. Shares of Quanta Computer, which manufactures artificial intelligence equipment, fell by almost 10%. Shares of LG Electronics, as well as Indian pharmaceutical companies and auto component suppliers such as Samvardhana Motherson International and Tata Motors, also came under pressure.
Amid these changes, investors expect inflation to rise in the US.