The U.S. currency surged across the board, while stock futures plunged on the first full day of trading since Trump slapped tariffs on imports from China, Canada and Mexico.
The dollar surged and stock futures tumbled on Monday as the world lurched toward an all-out trade war.
The dollar, which tends to rise at moments of global financial stress and uncertainty, surged across the board, while stock futures plunged on the first full day of trading since U.S. President Donald Trump announced the imposition of a suite of tariffs on imports from China, Canada and Mexico.
The measures were broadly as threatened by Trump during his election campaign last year, but still had an immediate impact as many in the markets had hoped that his threats were only a bargaining ploy.
An hour before the official market opening, the benchmark Stoxx 50 index futures contract was down 2.3 percent, while the German DAX index futures was down 2.1 percent and the French CAC 40 contract was down 1.7 percent.
In currency markets, the euro fell 1.2 percent to $1.0238, its lowest in more than two weeks, while the dollar also surged 1.3 percent against the Canadian dollar and 2.2 percent against the Mexican peso. Both Canada and Mexico have already announced countermeasures.
Trump is aiming to use tariffs to rebalance the U.S.’s huge trade deficit and bring manufacturing back to the U.S. In the first instance, however, economists say they will push up prices and hurt growth across the globe.
Julian Hinz, an economist at the Kiel-based Institute for World Economy in Germany, estimated that the hit to the Mexican economy could be more than 4 percent of gross domestic product in the first year of tariffs, while the hit to Canada could be nearly 3 percent. For Canada, the worst-case scenario could yet be avoided, as Trump has only levied a 10 percent duty on energy imports, rather than the full 25 percent levied on other goods.
While Trump has so far not announced measures against the EU, he said at the weekend that he “absolutely” intends to.