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“No one will win a trade war or a tariff war,” warned a Chinese embassy spokesperson in Washington yesterday, reacting to president-elect Trump’s pledge via social media on Monday to impose a blanket additional 10% tax on all incoming Chinese goods. Trump alleged that China had failed to crack down on narcotics — in particular Fentanyl — from being sent to the US and that the tariff would remain in place until China takes definitive action, including a death penalty for drug smugglers.
The incoming administration also put neighbors — and historically close trading partners — Mexico and Canada on notice, pledging a 25% tariff on “ALL products” from its top two trading partners. Trump posted on his Truth Social platform — with his characteristically bizarre use of capital letters — that the “Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country.”
Mexico is already saying that it is prepared to respond, with the country’s president Claudia Sheinbaum warning that “to one tariff will follow another in response and so on, until we put our common businesses at risk” at a press conference yesterday. This would lead to job losses and inflation on both sides of the border, Sheinbaum argued.
Trade is also a two-way street, and the prospect of a trade war between the US and the three countries could have a big impact on American businesses and the economy at large — especially considering that the three countries are also the top three importers of US-made goods.
The three targeted countries are already feeling the squeeze in the currency markets, with the MXN falling 2.5% against the greenback yesterday, along with the CAD that fell 0.7% and CNY that dropped 0.2%.
But so too are US automakers — who rely on Mexico for much of their production — with shares in General Motors slipping 8.9% and Ford dropping 2.6% despite both the Nasdaq and S&P 500 ending the day comfortably in the green. “If implemented, this would spell disaster for the U.S. auto industry and Detroit Three manufacturers, all of whom import significant numbers of vehicles from Canada and Mexico,” Bernstein analyst Daniel Roeska said in a note seen by Reuters.
MARKETS THIS MORNING-
Asian markets are kicking the day off in the red, on the heels of gains on Wall Street with the Dow Jones and S&P 500 both closing on all-time record highs. Leading the pack in the red is Japan’s Nikkei at -0.8%, China’s Shanghai index at -0.5%, and Hong Kong’s Hang Seng at -0.1%. Korea’s Kospi is just in the green at +0.1%.
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ADX |
9,294 |
+0.7% (YTD: -3.1%) |
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DFM |
4,829 |
+1.3% (YTD: +18.9%) |
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Nasdaq Dubai UAE20 |
3,934 |
+1.7% (YTD: +2.4%) |
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USD : AED CBUAE |
Buy 3.67 |
Sell 3.67 |
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EIBOR |
4.5% o/n |
4.4% 1 yr |
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TASI |
11,736 |
-0.4% (YTD: -1.9%) |
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EGX30 |
30,284 |
+0.1% (YTD: +21.7%) |
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S&P 500 |
6022 |
+0.6% (YTD: +26.2%) |
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FTSE 100 |
8259 |
-0.4% (YTD: +6.8%) |
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Euro Stoxx 50 |
4762 |
-0.8% (YTD: +5.3%) |
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Brent crude |
USD 72.86 |
+0.1% |
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Natural gas (Nymex) |
USD 3.43 |
+1.8% |
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Gold |
USD 2658.20 |
+0.6% |
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BTC |
USD 91,985.40 |
-1.8% (YTD: +116.2%) |
THE CLOSING BELL-
The ADX rose 0.7% yesterday on turnover of AED 1.2 bn. The index is down 3.1% YTD.
In the green: Takaful (15.0%), Emirates Stallions Group (+14.9%) and Hily Holding (+11.5%).
In the red: Al Khaleej Investment (-9.9%), Ghitha Holding (-4.7%) and Lulu Retail (-4.2%).
Over on the DFM, the index rose 1.3% on turnover of AED 597.6 mn. Meanwhile, Nasdaq Dubai closed up 1.7%.
CORPORATE ACTIONS-
Methaq Takaful Ins. approved a capital increase through its shareholders, during a general assembly meeting, according to an ADX disclosure (pdf), without disclosing the exact amount it plans to increase.
