Donald Trump, US President sudden announcement of tariffs on all Mexican imports resulted to Asian stocks edged down as it saw Tokyo shares drop, knock investors. The US President’s Twitter declaration of a five per cent tariff on all goods from Mexico starting June 10 sent shares in automakers with plants in the North American country falling sharply. Trump said the duties would gradually increase until “illegal migrants” stop coming into the United States through Mexico. Mexico’s under-secretary for North American affairs called the move “disastrous” and vowed to retaliate.
The declaration saw shares in Japanese automakers decline, with Honda dropping from 4.26 per cent to 2,651 yen, Mazda descending from 7.13 per cent to 1,061.5 yen, Nissan down from 5.31 per cent to 734.6 yen, and Toyota falling from 2.84 per cent to 6,384 yen. Tokyo’s main index fell 1.6 per cent, while Hong Kong shed 0.8 per cent. Shanghai edged down 0.2 per cent and Singapore lost 0.8 per cent. Sydney and Seoul managed a 0.1 per cent gain. European stocks also crashed at the open, with London slipping 0.7 per cent. Frankfurt shed 1.3 per cent and Paris withdraw1.0 per cent.
Trump’s declaration has put the new North American trade pact between the US, Canada and Mexico at risk with the agreement still awaiting confirmation by the legislatures of the three countries. In a letter to the US President after the declaration, the Mexican President Andres Manuel Lopez Obrador struck an unaggressive tone. “I express to you that I don’t want confrontation,” he wrote. “I propose deepening our dialogue, to look for other alternatives to the migration problem.”
– ‘Markets are troubled’ –
Coming amidst extended trade war between the United States and China, the pronouncement will do little to relieve investors’ tension.
“A U.S.-China trade deal will be even less likely,” said Khoon Goh, head of research at Australia & New Zealand Banking Group Ltd. in Singapore. “At the end of the day, what’s the point of doing a deal if the U.S. can just impose tariffs arbitrarily?”
In recent days China and the US have boost up the bombast, with Beijing accusing Washington of “naked economic terrorism” and Trump dismissing the Asian superpower as “a very weakened nation”.
The two sides have not set a date for negotiations to resume in the row that has seen Washington and Beijing slap tit-for-tat tariffs on imports, while Trump’s decision to blacklist Chinese telecom giant Huawei earlier this month has added a new dimension to the awkward relationship.
“Markets are getting nervous that we may not see anything constructive on the trade front until the June 28-29th G20 summit, where President Trump and his Chinese counterpart will meet on the sidelines”, said OANDA senior market analyst Edward Moya. “The longer the trade war lasts, the greater the global growth deterioration,” he said.
Oil prices fell after a smaller-than-expected drop in US crude supplies, with new data showing US oil production at an all-time high. “US production appears to be ramping up too quickly to allow inventories to come down much,” Moya said. “Gasoline inventories also posted a strong rise for a second consecutive week, despite the beginning of the summer driving season.”
– Key figures around 0820 GMT –
Tokyo – Nikkei 225: DOWN 1.6 percent at 20,601.19 (close)
Hong Kong – Hang Seng: DOWN 0.8 percent at 26,901.09 (close)
Shanghai – Composite: DOWN 0.2 percent at 2,898.70 (close)
London – FTSE 100: DOWN 0.7 percent at 7,167.24 (open)
Pound/dollar: UP at $1.2627 from $1.2613 at 2100 GMT
Euro/dollar: UP at $1.1151 from $1.1130
Dollar/yen: DOWN at 108.86 yen from 109.61 yen
Oil – Brent Crude: DOWN 90 cents at $65.97 per barrel
Oil – West Texas Intermediate: DOWN 51 cents at $56.08 per barrel
New York – Dow: UP 0.2 percent at 25,169.88 (close)