The Dow Jones Index (US30) was down 0.84% at Tuesday’s close. The S&P 500 Index (US500) was down 1.57%. The Nasdaq Technology Index (US100) decreases by 1.95%. President Trump’s announcement that tariffs on Chinese imports will rise to 104% starting tomorrow was a strong move toward protectionism. It heightened fears of a protracted economic conflict between the world’s largest economies. The move sparked widespread risk aversion and accelerated capital outflows from trade-dependent economies.

The Canadian dollar strengthened to $1.41, approaching a four-month high on April 3, as investors assess Canada’s relative defensiveness against tough new US tariffs. Signals that Canada will largely remain free of expanded duties under the USMCA have helped ease trade fears, and ongoing international tariff negotiations continue to provide support. Domestically, Canadian business confidence remains resilient, as evidenced by the Ivey PMI holding above 50, but continued vulnerability in key sectors.

The Mexican peso fell to 20.9 per US dollar, the weakest since March 2022, as a sharp escalation in the trade war between the US and China shook global markets and increased pressure on emerging economies such as Mexico, where external demand and US growth are critical pillars.

Equity markets in Europe were mostly up on Tuesday. Germany’s DAX (DE40) rose by 2.48%, France’s CAC 40 (FR40) closed 2.50% higher, Spain’s IBEX 35 (ES35) gained 2.37%, and the UK’s FTSE 100 (UK100) closed 2.71% higher. European stocks bounced back on Tuesday after the worst four-day drop since the pandemic, sparked by concerns over US tariffs. The rebound was fueled by optimism that the US may soften its stance on tariffs as negotiations are underway. However, despite the recovery, trade tensions remain elevated. EU officials have said they are prepared to take a wide range of retaliatory measures, including possible digital taxes, and have warned of 25% tariffs on selected US goods. Trump has rejected a proposed zero-for-zero agreement on industrial tariffs, keeping tensions high.

On Tuesday, WTI crude futures fell more than 3% to below $59 a barrel, a four-year low, as President Trump confirmed that tariffs on China will rise to 104% from Wednesday, adding to fears of a global recession. While hopes briefly rose on reports that the US may reduce or eliminate tariffs with some countries, including South Korea, lack of progress in broader trade talks and escalating tariffs caused markets to reassess the outlook for global demand. Additional pressure came from a planned OPEC+ production increase in May, price cuts by Saudi Arabia, and rising geopolitical tensions, including Trump’s comments on direct talks with Iran.

Asian markets were predominantly down yesterday. Japan’s Nikkei 225 (JP225) gained 6.03% yesterday, China’s FTSE China A50 (CHA50) added 2.09%, Hong Kong’s Hang Seng (HK50) bounced 1.51% and Australia’s ASX 200 (AU200) was positive 2.27%.

The Reserve Bank of New Zealand cut the official money rate by 25 bps to 3.5% for the fifth consecutive meeting, citing a steady decline in inflation and weakening domestic economic conditions. The Central Bank also warned of the risks of weakening competitiveness of New Zealand’s export-oriented economy due to global trade barriers. In addition, the currency remains vulnerable to concerns that US President Donald Trump’s tariff policies could cause economic damage globally, especially to China, New Zealand’s largest export market.

The Reserve Bank of India (RBI) cut its key repo rate by 25 bps to 6% at its April meeting, marking consecutive rate cuts of the same magnitude and in line with market expectations. On the economic outlook, the RBI slightly lowered its GDP growth projections for FY 2025/26 to 6.5% from 6.7%. The quarterly growth expectations are 6.5% in Q1, 6.7% in Q2, 6.6% in Q3, and 6.3% in Q4. The inflation estimate has been revised downward to 4% from 4.2%, remaining within RBI’s target range of 2-6%.