Global markets are set for turbulence on Monday after U.S. President Donald Trump initiated a trade war with extensive tariffs on Canada, Mexico, and China. The move has raised concerns over economic growth and inflationary pressures, prompting immediate retaliation from affected nations.
Canada and Mexico, the U.S.’s largest trading partners, have vowed countermeasures, while China has signaled it will take “counter measures.” The uncertainty surrounding Trump’s tariffs, combined with the recent emergence of China’s DeepSeek AI model affecting tech stocks, has created significant market unease.
“I do think the markets are going to react to this,” said Mark Malek, chief investment officer at Siebert Financial in New York. “Until now, the market has really been on Trump’s side, but that could change and the market could challenge him for the first time.”
In three executive orders, Trump imposed 25% tariffs on Mexican and most Canadian imports and 10% on Chinese goods, effective Tuesday. In response, Canada announced 25% tariffs on $155 billion worth of U.S. goods, with an initial $30 billion taking effect immediately and the remainder in 21 days.
“It’s negative for CAD, MXN, and CNH, as well as overall risk,” said Nick Twidale, chief market analyst at ATFX Global in Sydney. Analysts predict sharp currency movements when Asian markets open, with Canada’s dollar recently hitting a five-year low and Mexico’s peso potentially dropping 12% under new tariffs.
Stock markets are also expected to react, with analysts anticipating declines due to tariff-driven inflation concerns and potential Federal Reserve policy shifts. European Central Bank policymaker Klaas Knot warned of rising inflation and interest rates in the U.S., which could also weaken the euro.
“It’s only a matter of time before the EU is targeted,” said Marchel Alexandrovich, economist at Saltmarsh Economics. The global trade landscape remains on edge as further economic fallout looms.