Markets whipsawed on Monday, as traders sought clarity on US president Donald Trump’s plans to impose tariffs on a number of countries after he agreed to pause the levies on Mexico and Canada.
Stock markets pared losses on the day, but European shares still posted their worst session in a month. US shares fell, while crypto assets plunged before recovering. Commodities slid amid fears the tariffs will lead to weaker economic growth.
“At this point, we are doubtful that the tariffs on Canada and Mexico will be long lasting, if enacted at all,” said Keith Lerner and Michael Skordeles at Truist Advisory Services. “Nevertheless, until there is clarity on the duration or magnitude of tariffs, these actions inject uncertainty into supply chains and pricing for many companies – large and small – across North America.”
Trump’s move to unilaterally impose tariffs on China, Mexico and Canada from Tuesday had been followed by a broad sell off across most markets before he agreed with Mexican president Claudia Sheinbaum to pause the additional tax for one month. Late on Monday he also agreed to pause the tariffs on Canada too.
Even after his decision to hold off on setting a 25 per cent levy on goods from both countries for the next month, the uncertainty has created a headache for investors who appear unsure of what the US president’s next move may be. He has previously warned he will set tariffs on imports from the European Union as well.
The benchmark Stoxx Europe 600 Index fell 0.9 per cent by the close in London, paring an earlier drop of as much as 1.6 per cent. Car companies were particularly hard hit on Monday, with an index of the sector falling as much as 4.5 per cent, the most since 2022, with Stellantis and Volkswagen among the biggest laggards. The Stoxx 600 autos and parts subindex closed down 2.2 per cent. Spanish banks with exposure to Mexico – BBVA and Banco Santander – pared earlier declines after news of the tariff delay.
“Markets had largely been expecting a slower implementation [of tariffs],” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “One thing is sure, volatility is here to stay,” he added.
[ Trump says tariffs on EU will ‘definitely happen’ but UK could avoid themOpens in new window ]
There was a similar rebound in the US, with the S&P 500 falling 0.6 per cent by lunchtime in New York, having earlier been off as much as 2 per cent.
Crypto assets had slumped earlier in the day, but surged back amid the pause on Mexico tariffs.
Bitcoin rose 1.4 per cent, while an index of smaller tokens that was on track for the steepest two-day rout in almost three years climbed from its lows
US crude fell 0.11 per cent to $72.45 a barrel and Brent fell to $75.49 per barrel, down 0.24 per cent on the day but better than had been seen before the tariff pause.
The sense of whiplash was seen across currency markets too. The US dollar had surged more than 1 per cent against a basket of currencies earlier in the day on the back of the tariffs, but weakened later, and was 0.6 per cent stronger by the evening.
Traders traditionally bet on the dollar at times of economic uncertainty, or in the expectation of higher inflation in the US. That would force the US Federal Reserve to hike interest rates, which would in turn strengthen the greenback. Additional reporting: agencies
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