U.S. President Donald Trump’s tariffs were meant to make America great again, but they ended up inflicting more damage on U.S. stocks than other markets.
U.S. equities have fared the worst among the major asset classes since Trump took office on Jan. 20, with the S&P 500 Index dropping about 8% and the Nasdaq 100 Index sliding more than 10%. The other casualties include the dollar as well as Australian and Canadian stocks while the euro, yen and Chinese yuan have all advanced.
Trump’s aggressive trade posture, along with an upending of relationships with allies, has arguably been the biggest driver for global markets as investors predict his levies will curb U.S. growth. The president’s policy flip-flops have also sowed volatility and boosted demand for havens such as gold and the Swiss franc.
“Trump’s tariff policies have dampened investor confidence and raised concerns about potential stagflation,” said Manish Bhargava, chief executive officer at Straits Investment Management in Singapore. “These early market reactions suggest investors are recalibrating their expectations about the economic impacts of the new administration’s policies, particularly regarding trade relationships and fiscal policy.”
The Bloomberg Dollar Spot Index, which measures the greenback’s performance against a group of developed and emerging-market currencies, has declined more than 3.5% since Trump’s inauguration. On the flip side, the pound has strengthened 6.4% to emerge as the biggest gainer. The euro jumped 5.6%, thanks to Germany’s defense spending plans in reaction to Trump’s stance on the Ukraine war.
The slide in the greenback has buoyed even the currencies of of some countries that were targeted by U.S. tariffs. The Mexican peso rose over 3% while the offshore yuan gained more than 1%. The Canadian dollar was little changed.
In the meantime, copper has climbed to a five-month high to lead a rise in industrial metals as investors priced in distortions that tariffs are bringing to the global trade flow of commodities. Disruption to trade has also weighed on the prices of major agriculture commodities from soybean to corn. Gold has notched a series of record highs since Trump’s return to the White House.
The next event on investors’ radar is the implementation of sweeping U.S. reciprocal tariffs on trading parters which are set to start as soon as April 2.
With assistance from Hallie Gu.
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