The U.S. dollar surged on Monday after President Donald Trump imposed sweeping tariffs on Canada, Mexico, and China, triggering immediate retaliation from trading partners. Global markets reacted sharply, with the euro plunging, the yuan hitting record lows, and Bitcoin falling below $100,000.
Global financial markets reacted strongly on Monday after U.S. President Donald Trump imposed tariffs on Canada, Mexico, and China, escalating fears of a full-scale trade war.
The U.S. dollar strengthened, sending the Canadian dollar and Mexican peso to multi-year lows, while China’s offshore yuan fell to a record low. The euro also plunged to its weakest level since 2022, and Bitcoin dropped below $100,000 as investors adjusted to the impact of new trade barriers.
Canada and Mexico, the top two U.S. trading partners, immediately vowed retaliatory measures, while China announced plans to challenge the tariffs at the World Trade Organization (WTO).
The U.S. dollar advanced against major currencies:
Mexican peso fell to its lowest since 2022, trading at 21.40 per dollar.
Canadian dollar dropped to C$1.4755 per U.S. dollar, its weakest level since 2003.
Euro fell 2.3% to $1.0125, before recovering slightly.
Bitcoin dropped 4.4% to $97,622, slipping below $100,000 for the first time in weeks.
“The surprise for markets is that Canada and Mexico retaliated immediately, and that China and the EU may follow," said Tony Sycamore, market analyst at IG.
As Trump had promised, the U.S. imposed:
25% tariffs on imports from Canada and Mexico
10% tariffs on Chinese goods
Trump justified the measures as necessary to combat illegal immigration and the drug trade. However, analysts warn that immediate retaliation from Canada and Mexico, combined with China’s WTO challenge, could further destabilize global trade.
"Trump's early strike, just two weeks into his four-year term, is likely to hit investor confidence," said Mansoor Mohi-uddin, chief economist at the Bank of Singapore.
With markets already bracing for potential tariffs on Europe, analysts warn that sustained trade disputes could lead to stagflation—weak growth combined with rising inflation.
What’s Next?
As global markets adjust to the new tariffs, investors are also scaling back expectations of Federal Reserve interest rate cuts, with traders now pricing in just 41 basis points of easing for 2025.
With retaliatory measures already in place and uncertainty surrounding future U.S. trade policy, financial markets are likely to see continued volatility in the days ahead.
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