Trump's Second Term: Uncertainty Looms with Trade Tariff Threats

Donald Trump's second presidency brings market uncertainty, especially with tariff threats on Mexico and Canada. While Chinese markets find some relief, the U.S. dollar rallies, affecting global markets. Investors express mixed reactions, noting opportunities in the volatility despite potential economic risks.

Donald Trump's return to the White House for a second term has injected significant uncertainty into global markets, with investors grappling with his unexpected trade tariff threats on Mexico and Canada. Trump went soft on China, avoiding an initial flurry of executive orders. However, he promptly warned of 25% tariffs against neighboring countries, causing their currencies to tumble on the very first day of February.

Despite the initial shock, the U.S. dollar showed recovery, achieving a five-year high against the Canadian dollar and sparking a broader European currency fall. Wall Street traders believe Trump's familiar 'America first' slogan could benefit corporate profits, lifting the S&P 500 by 0.5% after Monday's public holiday closure.

Yet, his broader strategic moves, such as pulling out of the Paris climate accord and reversing green policies, have driven volatility. JPMorgan, reacting to these developments, has set up a 'war room'. Meanwhile, global economic players, including China's vice premier, voice grave concerns over this turn toward protectionism and its potential to tip economies into recession.

(With inputs from agencies.)