The US dollar posted strong gains on Tuesday, while European stocks came under increasing pressure following an announcement by US President-elect Donald Trump about his plan to impose tariffs on all imports from Canada and Mexico, in addition to extra tariffs on Chinese goods.
European markets saw sharp declines, with auto stocks leading the losses. Shares of companies such as Volkswagen and Stellantis – the maker of Fiat and Chrysler vehicles – fell between 2.6% and 5%, amid concerns over the potential impact of the tariffs on the auto sector, which heavily relies on cross-border trade.
The Canadian dollar also came under significant pressure, while the euro saw a noticeable drop against the dollar. A market strategist noted, “This move was expected, as markets began speculating about the next target of Trump’s policies, prompting traders to reduce their positions in European stocks.”
In the United States, S&P 500 futures registered a slight decline of 0.1% after modest gains in the previous session. Meanwhile, Trump’s announcement of Scott Bessent as Treasury Secretary continued to lift market sentiment on Monday before the optimism was undermined by tariff threats.
The US dollar made a strong jump, climbing 2.3% against the Mexican peso to 20.75 pesos and gaining 1% against the Canadian dollar to reach 1.4139 CAD. It also posted notable gains against the Chinese yuan in offshore trading, surpassing levels not seen since July.
Trump announced on “Truth Social” his plans to impose a 25% tariff on all imports from Mexico and Canada, along with a 10% tariff on imports from China, citing concerns over illegal immigration.
Amid growing uncertainty, investor sentiment in currency and stock markets weakened. The euro fell to $1.04838, while the British pound declined to $1.2548. In Asian currencies, the USD/JPY pair came under pressure, with the dollar falling 0.3% to 153.66 yen, as US Treasury yields saw a slight uptick.
Cryptocurrencies were not spared either, as Bitcoin dropped 1% to $92,781, continuing its pullback from last week’s record highs.
Gold was weighed down by the strength of the dollar, falling to a one-week low of $2,604.99 per ounce. In contrast, oil prices experienced some recovery after sharp declines in the previous session. Brent crude futures rose 0.6% to $73.41 per barrel, while West Texas Intermediate futures increased 0.45% to $69.25 per barrel, as markets awaited potential signs of a Middle East ceasefire.
