Stocks Slump, Dollar Towers as Trump Tariff Threat Roils Markets

Ahsan Ali February 28, 2025

Stocks Slump, Dollar Towers as Trump Tariff Threat Roils Markets

Global markets took a hit on Friday as escalating trade tensions, fueled by U.S. President Donald Trump's renewed tariff threats, sent stocks tumbling and the U.S. dollar surging. Equities across Asia faced a sharp decline, with technology stocks bearing the brunt of the damage.

Trump's confirmation that the 25% tariffs on imports from Canada and Mexico would take effect on March 4, rather than the previously indicated April 2, further intensified concerns. The former U.S. president also reiterated that China would face an additional 10% duty on its goods, pushing trade war worries to new heights.

Key Market Movements:

Asian Markets: Japan's Nikkei index fell by 3.3%, driven by a stronger yen, while South Korea's Kospi lost 3.2%. Taiwan's shares dropped 1.5%, and Australia's stock benchmark slid 1.3%. Hong Kong's Hang Seng index declined by 2.3%.
U.S. Markets: The Dow Jones Industrial Average ended down by nearly 0.5%, while the S&P 500 plunged 1.6%, and the Nasdaq saw its largest drop in a month, falling 2.8%.
Currency Markets: The U.S. dollar index reached its highest point since February 13, climbing to 107.39. The euro dipped to $1.0380, and the Swiss franc strengthened to 0.8989 per dollar. Meanwhile, the yen rose 0.2% to 149.54 per dollar, bolstered by declining U.S. Treasury yields.

Investor Sentiment: The sell-off in equities was compounded by concerns about the broader economic impact of the tariff threats. Investors are now bracing for potential stimulus measures from Beijing, especially with China's National People's Congress meeting next week.

Technology stocks, particularly semiconductor companies like Nvidia, faced an additional blow, as their recent earnings reports were harshly received, triggering a broader sell-off in the sector.

As a result, global stocks are on track for their worst week since mid-December, with a 2% decline. Safe-haven assets like gold and the Swiss franc gained ground, while cryptocurrencies like Bitcoin saw a dip, falling below $80,000 for the first time in over three months.

Outlook: Despite the immediate negative market reactions, analysts are forecasting potential stimulus measures from China in the face of these escalating trade tensions. The Federal Reserve's response to these developments will also be crucial, as traders are now pricing in at least two interest rate cuts this year, with the first potentially arriving in June.

With the threat of further tariffs looming, markets are likely to remain volatile in the coming weeks. The next key data point will be the U.S. Personal Consumption Expenditures (PCE) price index, set to be released later today, followed by the non-farm payrolls report next week.

Key Data to Watch: