As a more extensive trade conflict approaches, President Donald Trump of the United States has confirmed a 25% increase in import tariffs on goods from Canada and Mexico, set to take effect on March 4.
Consequently, the Nasdaq saw a significant decline, dropping 640 index points to settle at 20,632 during Thursday’s trading session and continuing to feel the pressure today, Friday (February 28, 2025). This marks the lowest points for Nasdaq in the past three months. Interestingly, Gold prices also fell dramatically, down nearly $40 or 400 pips.
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This drop in Gold can be attributed to profit-taking activities along with the US dollar strengthening sharply amidst escalating trade war tensions. Market participants are also anxiously awaiting the release of core inflation data based on the Personal Consumption Expenditure (PCE) report later tonight, which could influence expectations regarding potential interest rate cuts by the Federal Reserve.
With trade war risks rising, both EUR/USD and GBP/USD experienced declines during trading on Thursday.
On the same day, Trump also announced an additional 10% import tariff on Chinese goods, effective March 4. As the 47th President of the United States, he further proposed a 25% tariff increase on imports from the European Union, further intensifying trade war risks.
These circumstances are likely to put downward pressure on stock indexes like the Nasdaq. As a traditional safe haven, the US dollar could enjoy positive sentiment, which may lead to further strains on EUR/USD and GBP/USD.
Meanwhile, Gold, currently undergoing a correction and reaching a two-week low, might see a resurgence in demand. The rise in Gold prices since the start of the year has repeatedly set record highs, largely fueled by concerns of a broader trade war.
