Following U.S. President Donald Trump’s retaliatory tariff announcement on Wednesday evening, the euro experienced a significant surge against the U.S. dollar. By 5:17 AM, the EUR/USD pairing had risen by 0.5%, exceeding half a cent, reaching 1.0915—a figure close to the five-month peak of 1.0953. This nearly offset all declines recorded since Trump's reelection on November 5th.
The U.S. president stated that his administration would enforce a base tariff of at least 10% on goods from every country, along with extra charges for those deemed non-compliant. A chart was shown illustrating which countries would be subjected to increased tariffs, ranking them with China, the European Union, and Vietnam at the forefront—bearing respective rates of 34%, 20%, and 46%. These supplementary fees will elevate the overall duty on Chinese imports to 54% above the current standard rate of 20%.
The US dollar declined extensively against most of the key global currencies, notably weakening against the Japanese yen, the euro, the British pound, and the Swiss franc. This shift occurred as investors predicted negative repercussions for the United States economy. Consequently, 10-year US Treasury yields dropped to their lowest point since October 2024.
Nonetheless, commodity-linked currencies like the Australian dollar and the Canadian dollar declined relative to the US dollar. These currencies correlate with worldwide commodity values, including copper and crude oil, both of which experienced significant drops during Thursday’s trading in Asia. The extensive mutual tariff increases ignited worries of a comprehensive international trade conflict, leading to apprehensions regarding a severe economic slowdown and potentially wider recessions. This shift consequently dampened expectations for strong demand in industrial metals and energy sectors.
Global stock markets tumble
The news unsettled international markets, causing stocks to plunge throughout Asian exchanges on Thursday. Japan's equity market spearheaded the widespread declines, as its key index, the Nikkei 225, dropped almost 3% within the day. This was trailed by Hong Kong's Hang Seng Index, which fell about 1.5%, whereas Australia’s ASX 200 and South Korea’s Kospi both saw drops of around 1%.
Significantly, major mining company shares drove the widespread declines in the Australian stock market, as BHP decreased by 2.4% and Rio Tinto fell by 2.8%. A significant dip in copper prices had a substantial negative effect on local markets, which could also influence those in the UK because of these companies' listings in both regions.
Although Australia has limited direct trading ties with the US, the repercussions through China and other major Asian economies experiencing significant tariff impacts might negatively affect our heavily export-dependent economy," noted Josh Gilbert, a market analyst at eToro, in a statement. "This would be particularly true should global demand decrease and commodity prices drop.
US stock futures took a nosedive, with the Dow Jones Industrial Average down 2.01%, the S&P 500 dropping 2.78%, and the Nasdaq decreasing by 3.3%, signaling a steep decline when trading opens on Thursday. These declines are expected to spread across European markets today, as evidenced by Germany’s DAX futures which were already off by 1.89% at 5:30 am CET.
Tech stocks are poised for a downturn, as shown during the extended trading period on Wall Street. All seven major technology companies saw substantial drops in after-hours trading, includingTesla which fell by 4.5%, Apple dropping 2.3%, and Nvidia decreasing by 2.4%. "This will undoubtedly have an effect on these leading tech firms, particularly consideringApple's significant presence inChina andNvidia's dependence onTaiwan," Gilbert noted further.
Gold reaches an unprecedented peak
A risk-averse attitude caused gold prices to soar to unprecedented levels, with gold futures leaping to $3,195 an ounce at COMEX and spot gold climbing to a peak of $3,167 an ounce before pulling back.
Uncertainties may persist, potentially offering additional upward momentum for gold. "It wasn’t evident that the Trump administration would cease their 'trade war' efforts here," noted Kyle Rodda, a senior market analyst at Capital.com, suggesting continued ambiguity ahead.
Gold, often regarded as a safe-haven asset, saw an increase of 20% this year, building upon a significant 30% gain in 2024, which positioned it as one of the top-performing categories within assets. The rising purchases by central banks, concerns over potential devaluation of the U.S. dollar, and strategic hedges made by investors collectively fueled the sharp rise in gold prices in recent years.