Dollar Jumps And Stock Futures Decline On Tariffs: Markets Wrap

The dollar surged and stocks tumbled as the beginning of US tariffs ushered in a trade war threatening economic growth around the world.

The Bloomberg Dollar Index jumped as much as 1.3%, trading near a two-year high, before paring some of the advance. President Donald Trump announced tariffs on Canada, Mexico and China, and warned that European levies are coming. The Canadian dollar fell to its lowest since 2003 and the euro weakened. The yen, meanwhile, gained, suggesting some investors still see value in the Japanese currency as a haven in times of turmoil.

The impact of tariffs ricocheted across global markets. S&P 500 futures slid 1.6%, while US oil prices climbed on worries about a disruption to supply. European carmaker shares fell, with Volkswagen AG and Stellantis NV shedding more than 5%. Crypto was also hammered as Ether plunged 12% in a broad move away from risky assets.

Trump’s move is the most extensive act of protectionism taken by a US president in almost a century, with knock-on effects on everything from inflation to geopolitics and economic growth. Goldman Sachs Group Inc. strategists said there’s a risk of a 5% slump in US stocks because of the hit to corporate earnings, while RBC Capital Markets estimated the range at 5% to 10%.

“He seems to be like a poker player who’s betting his whole stash on the first hand,” Steven Englander, global head of G-10 FX research at Standard Chartered Plc, told Bloomberg TV on Monday. “The market just wasn’t prepared for it.”

The worry among investors is that US tariffs will force companies to raise prices in response, causing inflation to accelerate, consumers to pull back on spending and economic growth to slow. An initial analysis by Bloomberg Economics estimates the tariff impact may knock 1.2% off US economic growth and add 0.7% to the core personal consumption expenditures price index.

“We doubt that many companies will be able to avoid the impact of tariffs,” said Kathleen Brooks, research director at XTB Ltd. “Their actual implementation and the retaliatory tariffs that followed felt like crossing the Rubicon.”

Emerging markets also suffered large losses. The Mexican peso weakened more than 1%. The South African rand slumped after Trump said the US would halt all future funding to the country because of a new law that allows the state to seize private land in the public interest.

In energy markets, tariffs on imports from Canada and Mexico threaten to disrupt North America’s tightly integrated oil market and push up gasoline prices for American motorists. West Texas Intermediate jumped about 2%. Reflecting expectations that refiners will face higher costs, gasoline futures soared as much as 6.2% in New York.

Among individual movers in Europe, Julius Baer Group Ltd. shares dropped more than 10% after the Swiss wealth manager announced job cuts and a governance revamp. Raiffeisen Bank International AG plunged after Bloomberg reported that the Vienna-based lender has clients with ties to the Russian military.

Some key events this week:

Atlanta Fed President Raphael Bostic speaks on the economic outlook, Monday
Alphabet, UBS, BNP Paribas earnings, Tuesday
New Zealand unemployment, Wednesday
Toyota earnings, Wednesday
China Caixin services PMI, Wednesday
Eurozone HCOB Services PMI, PPI, Wednesday
Eurozone retail sales, Thursday
UK rate decision, Thursday
Amazon earnings, Thursday
Mexico rate decision, Thursday
India rate decision, Friday
Canada unemployment, Friday
US nonfarm payrolls, unemployment, University of Michigan consumer sentiment, Friday