Markets tumble over Trump’s tariffs as world leaders brace for his next moves
Tariffs on China, Canada to take effect Tuesday; EU appears to be next; US president delays tariffs on Mexico by a month after counterpart commits to more enforcement at border

WASHINGTON/BRUSSELS (Reuters) — American stocks opened Monday at their lowest level since Donald Trump was sworn in two weeks ago, as global markets slumped after the US president announced tariffs on Canada, Mexico and China, and world leaders responded to his threats to expand the tariffs to the European Union.
The US benchmark S&P 500 fell 1.7% at the opening bell, on the heels of the year’s biggest daily losses on a string of Asian and European bourses over fears of an economically damaging trade war.
The Mexican peso, which had been down about 1% against the US dollar Monday morning, changed course after Trump agreed to delay tariffs on Mexico by a month following a call with his Mexican counterpart, who committed to more law enforcement on the countries’ shared border.
Tariffs on China and Canada remain set to take effect on Tuesday.
Trump has said his tariffs on the three largest US trading partners might cause Americans some short-term pain, but “long-term, the United States has been ripped off by virtually every country in the world.”
Speaking in Washington on Sunday after returning from his Mar-a-Lago estate in Florida, Trump indicated that the 27-nation EU would be the next target of his tariffs, but did not say when.
“They don’t take our cars, they don’t take our farm products. They take almost nothing and we take everything from them,” he told reporters.
EU leaders meeting at an informal summit in Brussels on Monday said Europe would be prepared to fight back if the US imposes tariffs, but also called for reason and negotiation.

Arriving at the talks, French President Emmanuel Macron said if the EU were attacked in its commercial interests it would have to “make itself respected and thus react.”
Chancellor Olaf Scholz of Germany said the bloc could respond if necessary with its own tariffs against the US, but stressed it was better for the two to find common ground on trade.
Trump hinted that Britain, which left the EU in 2020, might be spared tariffs, saying: “I think that one can be worked out.”
The U.S. is the EU’s largest trade and investment partner. According to the Eurostat data from 2023, the United States had a deficit of 155.8 billion euros ($161.6 billion) with the EU in the trade of goods, partially offset by a 104 billion euros ($107 billion) surplus in the trade of services.
EU foreign policy chief Kaja Kallas said there were no winners in a trade war, and if one broke out between Europe and the United States, “then the one laughing on the side is China.”

Markets swoon
Both Canada and Mexico have announced tariffs on the US in retaliation for Trump’s announcement, but the US president has downplayed any expectations that he might change his mind.
Trump said Monday that he had spoken with Canadian Prime Minister Justin Trudeau and would do so again at 3 p.m. ET (2000 GMT).
The US president previously said he was also planning to speak with Mexico’s President Claudia Sheinbaum on Monday. After the call, Trump wrote on social media that he would pause tariffs planned for Mexico and that negotiations would continue to reach a “deal” between the two countries.
Trump said he would he would participate in the talks along with the heads of the US State, Treasury and Commerce departments.
Sheinbaum wrote on X that as part of the agreement, Mexico will send 10,000 National Guard troops to the US border to stop drugs, particularly fentanyl, from moving into the United States.
The United States, in turn, promised to work to stop the flow of high-powered weapons into Mexico from the US, she said.

Before Trump’s call with Sheinbaum, White House National Economic Council Director Kevin Hassett had suggested Washington was more satisfied with Mexico’s response so far than Canada’s.
Hassett told CNBC that Mexico appeared to be “very, very serious about doing what President Trump said,” but the “Canadians appear to have misunderstood the plain language of the executive order.”
Economists say Trump’s plan to impose 25% tariffs on Canada and Mexico and 10% tariffs on China would slow global growth and drive prices higher for Americans.
Trump says the tariffs are needed to curb immigration and narcotics trafficking and spur domestic industries.
Financial market reaction on Monday reflected concerns about the fallout from a trade war. Shares in Tokyo ended the day down almost 3% and Australia’s benchmark — often a proxy trade for Chinese markets — dropped 1.8%. The mainland China market was shut for Lunar New Year holidays.

Around lunchtime in Europe, Germany’s DAX index was down 1.8%, France’s CAC down 1.9% and Britain’s FTSE 100 down 1.5%.
The Chinese yuan, Canadian dollar and Mexican peso all slumped against a soaring US dollar, though the peso changed course after Sheinbaum announced her agreement with Trump.
US oil prices jumped more than 1%, and gasoline futures nearly 3%, amid the imminent tariffs on competitors Canada and Mexico, the top sources of US crude oil imports.
Trump’s tariffs will cover almost half of all US imports and would require the United States to more than double its own manufacturing output to cover the gap – an unfeasible task in the near term, ING analysts wrote.
Other analysts said the tariffs could throw Canada and Mexico into recession and trigger “stagflation” — high inflation, stagnant growth and elevated unemployment — at home.
In Europe, economists at Deutsche Bank said they were currently factoring in a 0.5% hit to gross domestic product (GDP) should Trump impose 10% tariffs on the bloc.

National emergency
A White House fact sheet had given no details on what Canada, Mexico and China would need to do to win a reprieve.
Trump vowed to keep the sanctions in place until what he described as a national emergency over fentanyl, a deadly opioid, and illegal immigration to the United States ends.
China called fentanyl America’s problem and said it would challenge the tariffs at the World Trade Organization and take other countermeasures, but also left the door open for talks. Canada said it would take legal action under the relevant international bodies to challenge the tariffs, and Sheinbaum — before agreeing with Trump on increased enforcement at the US-Mexico border — had said she would provide more details on Monday of the retaliatory tariffs she ordered on the weekend.
Automakers would be particularly hard hit, with new tariffs on vehicles built in Canada and Mexico, burdening a vast regional supply chain where parts can cross borders several times before final assembly. Ford and General Motors shares fell between 4% and 5%.
Shares in Volkswagen, BMW, Porsche, Stellantis, and truckmaker Daimler Truck all fell by about 5-6% in European trading on Monday.
Analysts at investment bank Stifel estimated that 8 billion ($8.25 billion) euros of VW’s revenues would be impacted by tariffs and 16 billion euros ($16.5 billion) of Stellantis.