US President Donald Trump announced on Sunday, January 28, 2025, that he would impose a 25% tariff on all steel and aluminum imports, sparking immediate reactions in global markets. The announcement came after German Chancellor Olaf Scholz stated that the European Union was prepared to retaliate "within an hour" if the US imposed tariffs on European imports.
Asian stock markets, particularly those of companies producing steel and aluminum, experienced declines, with the exception of firms operating factories in the United States. The Australian and Canadian dollars, along with the Norwegian krone, depreciated against the US dollar, which strengthened following Trump's announcement. The Asian MSCI stocks gauge fell by the most in a week, weighed down by Japan's Nikkei and South Korea's index. However, Hong Kong and Chinese shares were buoyed by tech stocks.
Gold prices surged, reaching a new record high of $2,886 per ounce, driven by speculation that Trump might impose import taxes on the precious metal. Oil prices, on the other hand, declined due to concerns that a trade war could slow down the global economy and reduce energy demand.
Trump's announcement also triggered a surge in the Japanese Yen (JPY), as expectations rose for the Bank of Japan (BoJ) to raise interest rates again this year. The EUR/JPY currency pair halted its three-day losing streak, trading around 156.70 during the Asian session on Monday. The upside of the currency cross could be attributed to worries that Japan would also be an eventual target of US President Donald Trump's trade tariffs.
Trump's announcement came just after Germany's Chancellor Olaf Scholz stated that the EU could react "within an hour" if the US imposed the proposed tariffs. Separately, Bernd Lange, head of the European Parliament's trade committee, suggested that to avoid a trade war, the EU is open to reducing its 10% import tax on vehicles to a rate closer to the 2.5% tariff imposed by the US.
The announcement of new tariffs has also raised concerns about potential deflationary pressures in the Eurozone, intensifying odds of deeper ECB rate cuts. Markets are now predicting the deposit rate could fall to 1.87% by December.