Last Saturday, United States President Donald Trump issued an executive order to increase import tariffs by 25% on goods from Canada and Mexico, and by 10% on products from China. This new policy is set to take effect on February 4, local time, leading to a tumultuous financial market during Monday’s trading session.
However, following some negotiations, Trump decided to postpone the import tariff hikes on Canada and Mexico for 30 days, while the tariffs for China remain unchanged.
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The Nasdaq index, which plummeted by over 600 points at the beginning of Monday’s trading, managed to recover significantly. Meanwhile, the US dollar weakened, allowing the EUR/USD to offset a decline after dropping more than 1500 points (150 pips). Similarly, GBP/USD rebounded after initially falling over 120 pips.
The weakening dollar also contributed to a rise in gold prices, which had previously been impacted by profit-taking, leading to a new all-time high of $2,830.68 per troy ounce at the beginning of the week.
On Monday, Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum announced that they had reached an agreement with the United States to bolster border enforcement efforts in response to Trump’s demands for stricter actions on immigration and drug smuggling. In exchange, Trump delayed the increase in import tariffs by 30 days.
Market sentiment is expected to be influenced by these developments during trading on Tuesday (February 4, 2025), with high volatility anticipated given the imminent implementation of tariffs on China within hours. The market is eagerly awaiting a response from China, whether it be a counter to the tariff increases or negotiations for a delay.
