Asian markets took a hit on Monday as fresh trade fears emerged following Donald Trump’s threat to impose massive tariffs on Colombia. The move, which includes a 25% tariff on Colombian goods set to rise to 50% next week, has sparked concerns among traders and investors.
The tariffs are in retaliation for Colombia’s refusal to accept deportation flights from the United States. President Gustavo Petro had initially blocked the flights, but later backed down and agreed to accept the deported citizens.
Trump’s decision has raised alarm bells among traders, who were initially optimistic about his trade policies. Last week, equities experienced a healthy run-up on hopes that Trump would take a less hardball approach to global trade. However, his latest move has dashed those hopes.
“The situation with Colombia just shows how little it takes for Trump to use tariffs as a negotiation tool,” said Dane Cekov at Sparebank 1 Markets.
Traders are also keeping a close eye on the impact of a new, cheaper Chinese generative AI programme, which claims to outperform big-name rivals. This development has raised worries that the recent surge in the sector may be called into question.
The Federal Reserve’s first policy meeting of the year, scheduled for this week, is also causing jitters. While it’s widely expected to hold rates, investors will be watching the statement and comments from Federal Reserve head Jerome Powell closely.
There are concerns that Trump’s pledges to impose tariffs while slashing taxes, immigration, and regulations could reignite inflation and force the central bank to pause its rate cuts or even hike them again.
The dollar has risen against most of its peers, gaining around 1% against the Mexican peso. Gold, a safe haven in times of uncertainty, is sitting just shy of its record high.
