Global trade concerns lift gold and pressure the dollar

In a surprising move in response to the Supreme Court’s decision, US President Donald Trump resorted to an old law to impose a 15 percent customs tariff, sparking a wave of uncertainty in global markets that reacted immediately and differently.

Just two days after the US Supreme Court ruled that his previous tariff policies were illegal, Donald Trump responded with a surprise announcement imposing a fixed 15 percent tariff on US trading partners.

These new duties, which are based on the Trade Act of 1974, are scheduled to take effect on Tuesday, giving the president the power to impose import restrictions for up to 150 days.

Financial markets are reacting cautiously

The market reaction was immediate; The dollar index fell by 0.3 percent against a basket of major currencies, while investors found a safe haven in gold, whose price jumped by 0.7 percent to reach $5,142 per ounce.

On the other hand, stock markets witnessed slight declines, as futures contracts for the Standard & Poor’s 500 and Stoxx Europe 600 indices fell by 0.5 percent and 0.2 percent, respectively.

Cryptocurrencies were not immune to this effect, as Bitcoin fell by 2.7 percent to settle at $65,801.

Asia: Cautious optimism amidst uncertainty

In contrast to Western markets, Asian stocks saw a notable rebound on Monday as investors welcomed the possibility of lower tariffs on some exporters under the new regime proposed by Trump.

Hong Kong’s Hang Seng Index led the gains with a 2.4 percent rise, Taiwan’s TAEX closed 0.5 percent higher, while South Korea’s Kospi rose 0.7 percent.

In this regard, Ekaterina Bigos, chief investment officer at BNP Paribas Asset Management, commented: “The market is pricing in uncertainty because it does not know where the tariffs will land,” according to the Financial Times.

China is watching and vowing to protect its interests

China’s Ministry of Commerce issued its first official reaction, stressing its opposition to unilateral tariffs and that it is “conducting a comprehensive assessment” of the impact of the ruling.

The ministry added in its statement: “We noted that the United States is preparing alternative measures to maintain its tariffs… China will monitor this matter closely and will firmly protect its interests.”

Have tariffs peaked?

Economists at Morgan Stanley believe that the new tariffs could be good news in the short term for Asia. In their report, they explained that the new rate would reduce the average duties on Asian goods from 20 percent to 17 percent, and on Chinese goods from 32 percent to 24 percent.

Although they warned that this relief may be “temporary,” they suggested that “tariffs on Asia have likely reached their peak,” according to the Financial Times.