Equities Fall and Volatility Increases Following Tariff Implementation
President Trump's 25% tariffs on Mexico and Canada took effect with retaliation planned from both countries. Canada will impose a 25% levy on approximately $100 billion of US imports, while Mexico will announce its response soon.
Additionally, Trump enacted a 10% duty on Chinese imports. In turn, China will implement a 15% tariff on various US goods, including chicken, wheat, and cotton, along with a 10% tariff on soybeans and seafood. China has also initiated a lawsuit against the US in the World Trade Organization.
Market reactions include:
- Gold prices rising
- Decline in stocks
- Elevated VIX, reaching above 26
The S&P 500 is down 1.2% year-to-date and the Nasdaq Composite has lost over 5% since the start of the year. Investor sentiment remains affected by uncertainty surrounding tariff policies and interest rate decisions.
Despite the tariffs, the Mexican peso and Canadian dollar showed slight declines, possibly reflecting investor optimism about the temporary nature of these tariffs. However, prolonged trade fees may lead to further selloffs in these currencies.