Economy

(Reuters) – A look at the day ahead in Asian markets. Donald Trump’s vow of hefty tariffs threatened to continue to cloud Asian trading on Wednesday after the U.S. president-elect’s surprise announcements roiled currency markets.Officials from Mexico, Canada and China warned of broad negative economic consequences after Trump called for a 25% tariff on imports from Canada and Mexico and an additional 10% levy on Chinese goods, until the countries clamped down on illicit drugs and migrants crossing the border. The reaction in these countries’ currencies against the dollar was swift: China’s yuan fell to its weakest in nearly four months, Canada’s currency hit its lowest in more than four years against the U.S. greenback, while the Mexican peso sank over 2%.Some of the reaction moderated toward the end of the U.S. session, as investors considered Trump’s salvo potentially part of a negotiating tactic that they were more prepared for after experiencing his first term as U.S. president. The reaction was also felt in equities, albeit more modestly. China’s blue-chip CSI300 index edged down 0.2%. European indexes also declined, with Europe’s STOXX 600 off 0.6%, while the U.S. benchmark S&P 500 ended with a 0.6% gain. Some pockets were hit harder, including auto stocks amid fears the tariffs would rattle supply chains. In Europe, Stellantis (NYSE:STLA) shares sank nearly 5%, while Volkswagen (ETR:VOWG_p) dropped more than 2%. In the U.S., General Motors (NYSE:GM) fell 9%.The day’s action served as a reminder of the volatility Trump could bring to markets, especially with his desire to implement tariffs, a day after his choice of prominent investor Scott Bessent to lead the Treasury Department appeared to calm concerns in the bond market.Elsewhere, markets will be following the fallout for Adani Group. Two more credit rating agencies cut their outlook for the Indian conglomerate, whose billionaire founder Gautam Adani has been charged by U.S. authorities over an alleged bribery scheme.Inflation will also be in focus on Wednesday, with the release of the key U.S. personal consumption expenditures price index, a measure followed closely by the Federal Reserve. Minutes released on Tuesday covering the latest Fed meeting showed central bank officials appeared divided over how much farther they may need to cut interest rates.In other central bank developments, the Reserve Bank of New Zealand was set to give its latest monetary policy decision, with expectations it will lower interest rates by 50 basis points.Here are key developments that could provide more direction to markets on Wednesday:- Reserve Bank of New Zealand monetary policy meeting- Australia CPI (Oct)- US PCE inflation data (Oct) More

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OTTAWA (Reuters) -Prime Minister Justin Trudeau on Tuesday said Canada must stay united against a threat by Donald Trump to impose tariffs but two major provinces quickly called on him to address the U.S. President-elect’s concerns.Trudeau, due to meet the premiers of the 10 provinces on Wednesday to discuss U.S. relations, often notes his Liberal government has four years’ experience of dealing with the first Trump administration.Trump said on Monday he would impose a 25% tariff on imports from Canada and Mexico until they clamped down on drugs, particularly fentanyl, and migrants crossing the border. Such a tariff would badly hit the economy of Canada, which sends 75% of all goods exports to the United States.”This is a relationship that we know takes a certain amount of working on, and that’s what we’ll do,” Trudeau told reporters. “One of the really important things is that we be all pulling together on this.”The premier of Ontario, the most populous province and the country’s industrial heartland, said Trump had good reason to be worried about security of the long shared frontier.”Do we need to do a better job on our borders? 1,000 percent … we do have to listen to the threat of too many illegals crossing the border,” Doug Ford (NYSE:F) told reporters.”We have to squash the illegal drugs, the illegal guns.”Public Safety Minister Dominic LeBlanc told reporters in Ottawa the Canadian government shared U.S. concerns about the border and was ready to provide additional technologies or manpower needed to improve border security.LeBlanc said the government had agreed to add drones and other surveillance methods at the border and provide necessary personnel to federal police and border authorities.Canadian law enforcement faces a challenge preventing migrants from crossing the border into the U.S., said Royal Canadian Mounted Police Sergeant Charles Poirier. Until they cross, they have committed no crime.”It’s very difficult to stop that flow of migrants going south for the main reason that the legislative tools at our disposal are geared towards northbound people coming into Canada illegally and not so much people leaving Canada and entering the United States illegally,” he told Reuters.Although dwarfed by crossings at the southern border, the number of migrants apprehended between ports of entry near the U.S.’s northern border has been rising sharply. It more than doubled between fiscal 2023 and fiscal 2024, when the U.S. border patrol apprehended 23,721 people.INSULTINGFord, who wants Trudeau to ditch the trilateral U.S.-Canada-Mexico trade deal in favor of a bilateral pact with the U.S., also said any tariffs would hurt both countries.Trump’s comparison of Canada to Mexico when it came to threats to the U.S. was “the most insulting thing I have ever heard”, he said.In another early sign of strain, the premier of the oil-rich province of Alberta said late on Monday that Trump had valid concerns related to illegal activities at the shared border. Trump’s plan does not exempt crude oil from the trade penalties, two sources familiar with the plan told Reuters on Tuesday.Canada is the world’s fourth-largest oil producer and sixth-largest natural gas producer. The vast majority of its 4 million barrels per day (bpd) of crude exports go to the U.S.”We are calling on the federal government to work with the incoming administration to resolve these issues immediately, thereby avoiding any unnecessary tariffs on Canadian exports to the U.S.,” Premier Danielle Smith said in a social media post.”The vast majority of Alberta’s energy exports to the U.S. are delivered through secure and safe pipelines which do not in any way contribute to these illegal activities at the border,” said Smith, whose relations with Trudeau are icy.Former Liberal finance minister John Manley called for calm, noting Trump had yet to take power.”Don’t set your hair on fire yet. We know Donald Trump is a bit of an entertainer,” he told the Canadian Broadcasting Corp. “You need to stroke his ego and you need to enable him to have some wins.” More

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On Monday, Trump said on social media site Truth Social that he would impose an additional 10% tariff on goods from China and a 25% levy for Canada and Mexico.
The three countries in question account for 43% of U.S. goods imports, and the tariffs would result in slightly less than $300 billion in revenue annually, according to Goldman Sachs calculations.
It remains to be seen whether the tariffs will actually be implemented at the levels Trump proposed or what exceptions might be made.

President-elect Donald Trump speaks at the U.S.-Mexico border on August 22, 2024 south of Sierra Vista, Arizona. 
Rebecca Noble | Getty Images News | Getty Images

The latest tariff proposal from President-elect Donald Trump would likely put upward pressure on inflation in the United States, according to Goldman Sachs.
On Monday, Trump said on social media site Truth Social that he would impose an additional 10% tariff on goods from China and a 25% duty for Canada and Mexico. Goldman’s chief economist, Jan Hatzius, said in a note that the proposed levies would result in a notable increase for consumer prices in the U.S..

“Using our rule of thumb that every 1 [percentage point] increase in the effective tariff rate would raise core PCE prices by 0.1%, we estimate that the proposed tariff increases would boost core PCE prices by 0.9% if implemented,” Hatzius said.
“PCE” refers to the personal consumption expenditures price index, which is the preferred inflation reading of the Federal Reserve.
A tariff-linked increase in core PCE could scramble the calculations around Fed rate cuts. The October PCE reading is due out Wednesday, and it’s expected to show a year-over-year increase of 2.8% for the core, according to economists surveyed by Dow Jones. In other words, inflation is still above the Fed’s target of 2%, and the tariffs could widen that gap.
Traders have been dialing back their expectations for Fed rate cuts in 2025, though it is unclear how much of that is due to election results versus a resilient U.S. economy. Fed Chair Jerome Powell has said the central bank will consider the impact of tariffs and other fiscal policy changes on the direction of inflation once the details become clear.
To be sure, it remains to be seen whether the tariffs will actually be implemented at the levels Trump proposed — or what exceptions might be made. The president-elect suggested in his social media post that the tariffs were conditional on changes to immigration policy and drug enforcement, specifically fentanyl. Some of Trump’s advisors and supporters have characterized the tariffs he proposed during the campaign as a bargaining position rather than a set policy.

Hatzius, for his part, said it seems more likely that Canada and Mexico would avoid across-the-board tariffs than China.
The three countries in question account for 43% of U.S. goods imports, and the tariffs would result in slightly less than $300 billion in revenue annually, according to Goldman Sachs calculations.

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