US President Trump announced on January 31 that starting from February 1, a 25% tariff will be imposed on goods imported from Canada and Mexico, and a 10% tariff will be imposed on goods imported from China. The financial market experienced severe volatility in response to the tariff news, with US stocks turning from gains to losses on Friday, and Bitcoin temporarily dropping by 4%, falling below the $102,000 mark.
(Prior context: Trump announces: 2/1 will impose 25% tariff on Canada and Mexico, oil may be exempted! Next step targets China?)
(Background supplement: Fed Chairman Powell: Trump’s tariffs become a source of inflationary pressure, the Fed may pause rate cuts)
US President Trump announced on Friday that starting from February 1, a 25% tariff will be imposed on imported goods from Mexico and Canada, and a 10% tariff will be imposed on imported goods from China. These three countries are unable to take any measures to prevent the implementation of these tariffs.
Trump stated that he will exempt Canadian oil, and the tariff on oil will not be 25% like other Canadian goods, but 10%. However, broader tariffs on oil and natural gas will be implemented in mid-February, causing oil prices to rise.
Tariffs to be imposed on China, Canada, and Mexico on 2/1
Trump has been threatening for weeks that these tariffs will take effect on February 1 and stated that these tariffs will remain in place until these countries take more measures to prevent immigration and fentanyl from entering the US border.
While signing the executive order in the Oval Office, Trump acknowledged that he understands that these tariffs may lead to increased costs and chaos in the short term. Most economists estimate that such extensive import taxes and possible retaliatory measures will disrupt global economic activities.
Trump denied that the tariff threats are a negotiating tool and emphasized that the US has a massive trade deficit with these three countries. He also hinted at more tariffs on European goods, steel, aluminum, copper, as well as pharmaceuticals and semiconductors.
White House spokesperson Karoline Leavitt stated in a press briefing:
The President will impose a 25% tariff on Mexico, a 25% tariff on Canada, and a 10% tariff on China starting tomorrow (Saturday) because they provide and allow illegal fentanyl to flow into our country, which has resulted in the deaths of tens of millions of Americans.
Karoline Leavitt stated that the specific details of the tariffs will be announced on Saturday.
US stocks and Bitcoin both decline
When the major US stock indices opened on Friday, they initially showed strength, as the US personal consumption expenditures (PCE) price index for December 2021 increased by 2.8% year-on-year, in line with market expectations, and the impressive earnings of tech stocks such as Apple.
However, after the White House confirmed that the tariff plan would take effect, the financial market was affected, experiencing severe volatility. Investors are concerned that the tariffs may reignite inflation just as price pressures appear to be easing. As a result, the major indices turned from gains to losses:
The Dow Jones Industrial Average fell 337.47 points, or 0.75%, to close at 44,544.66
The S&P 500 Index fell 30.64 points, or 0.50%, to close at 6,040.53
The Nasdaq Composite Index fell 54.31 points, or 0.28%, to close at 19,627.44
The Philadelphia Semiconductor Index fell 14.679 points, or 0.29%, to close at 5,015.852
The cryptocurrency market was also affected, with Bitcoin (BTC) falling from its high of $106,000 since 11 PM last night, reaching a low of $101,560 at 5 AM this morning, a decrease of over 4%. As of the time of writing, it has rebounded to $102,695, a decrease of 1.8% in the past 24 hours.
