By Tom Westbrook and Ankur Banerjee
SINGAPORE (Reuters) – Investors dusted off their trade war playbooks on Tuesday, confident their portfolios were better prepared this time for Donald Trump, after the U.S. president-elect took to social media and promised new tariffs on Mexico , Canada and China.
Muscle memory, formed over years of responding to Trump’s tweets and threats during his first term, sent the dollar up and the peso, Canadian dollar and yuan down moments after his posts on the Truth Social app about the tariffs that he would implement from the first day of his mandate. presidency.
Yet as traders took a breath, they saw little in Trump’s announcements that would change expectations about his policies or his bluster, including a trading style that investors feel better positioned to handle than they did eight years ago.
“The 25% tariff headlines…are not policy yet, but they are a good indication that under President Trump they will no longer tolerate the relocation of export manufacturing from China to US NAFTA partners by companies Chinese investments,” said George Boubouras, director of research at K2 Asset Management.
Trump, who takes office on Jan. 20, said he would immediately impose 25% tariffs on imports from Canada and Mexico until they clamp down on drugs and migrants crossing the border. He promised an additional 10% tariff on Chinese goods, which he also linked to drugs, particularly fentanyl.
The dollar rose more than 2% against the Mexican peso and about 1.4% against the Canadian dollar, before stabilizing about 1% higher in each.
The dollar hit a four-month high against the Chinese yuan, although stock indices in Hong Kong and China were mostly stable as investors interpreted Trump’s linking of tariffs to drug trafficking as bolstering expectations. that he was opening a negotiation.[.HK]
“China already has a model to address tariffs in reference to Trump 1.0,” said Simon Yu, deputy managing director at Panyao Asset Management in Shanghai.
“As for other drastic measures such as technology-related sanctions, China can accelerate the process of self-sufficiency and import substitution.”
China said it had informed the United States about progress in anti-narcotics law enforcement and that “no one will win a trade or tariff war.”
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Mexico’s tariff impact appeared to catch markets off guard and was behind sales at automakers and other manufacturers across Asia that have plants in the United States’ southern neighbor.
Trump’s proposal appears to violate the terms of the United States-Mexico-Canada Trade Agreement.
Shares of Honda, which sends 80% of its Mexican production to the United States, fell more than 2% to a four-and-a-half-month low, while shares of other auto and component makers fell.