US President Trump announced on January 31 that a 25% tariff will be imposed on goods imported from Canada and Mexico starting on February 1, and a 10% tariff will be imposed on goods imported from China. The news of the tariffs has caused severe market volatility, with US stocks turning from gains to losses on Friday and Bitcoin plummeting by 4% and falling below the $102,000 mark.
(Background: Trump Announces 25% Tariffs on Canada and Mexico on 2/1, Oil May Be Exempt! Next Step Targets China?)
President Trump announced on Friday that starting from February 1, a new 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 for oil will be 10% instead of 25% like other Canadian goods. 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 stop immigration and fentanyl from entering the US border.
When signing the executive order in the Oval Office of the White House, Trump stated that he understands that these tariffs may lead to increased costs and admitted that his actions may cause short-term disruptions. Most economists estimate that such wide-ranging import taxes and possible retaliatory measures will disrupt global economic activities.
Trump denied that the tariff threats are a negotiation tool, emphasizing that the US has huge trade deficits with these three countries and foreshadowed more tariffs on European goods, steel, aluminum, copper, as well as pharmaceuticals and semiconductors.
White House spokesperson Karoline Leavitt said 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 are providing and allowing 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 decline together
When the major US stock indexes opened on Friday, they initially showed simultaneous strength. The reason was that the US personal consumption expenditure (PCE) price index for December 2021 increased by 2.8% compared to the previous year, meeting market expectations and helping ease investors’ concerns about resurging inflation. Additionally, the impressive financial reports of tech stocks like Apple contributed to the initial gains.
However, after the White House confirmed that the tariff plans will take effect, the financial markets were affected, causing severe volatility. Investors are concerned that the tariffs may reignite inflation when price pressures seem to be subsiding. As a result, the major indexes turned from gains to losses:
– The Dow Jones Industrial Average fell 337.47 points, or 0.75%, to close at 44,544.66 points.
– The S&P 500 Index fell 30.64 points, or 0.50%, to close at 6,040.53 points.
– The Nasdaq Composite Index fell 54.31 points, or 0.28%, to close at 19,627.44 points.
– The Philadelphia Semiconductor Index fell 14.679 points, or 0.29%, to close at 5,015.852 points.
The cryptocurrency market was also impacted, with Bitcoin (BTC) experiencing a decline since 11:00 PM last night. It dropped from its high point of $106,000 to a low of $101,560 at 5:00 AM this morning, marking a decrease of over 4%. As of the time of writing, it has rebounded to $102,695, a decline of 1.8% in the past 24 hours.
