Fear of trade war puts pressure on stock markets

Fear of trade war puts pressure on stock markets Keystone-SDA

Global stock markets, including Switzerland, are bearing the brunt of punitive tariffs by the United States against Canada, Mexico and China.

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The tariffs have has revived fears of a trade war and negative consequences for the global economy.

According to the platform of the broker IG, the leading Swiss SMI index is expected to fall by 1.65%. The German DAX index is expected to fall by 2.2%. Further price losses are also expected on the US stock markets. Lower index values can already be seen on Asian stock exchanges.

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Traders therefore also fear profit-taking on the Swiss stock exchange. After the rise since the beginning of the year, the local market is considered to be overbought and therefore susceptible to a correction.

The SMI rose by 8.6% overall in January, more than twice as much as in the previous year (+4.2%).

Trump tariffs are a burden

Reports about the introduction of import tariffs had already put a damper on the New York stock exchanges last Friday and ended the record run. This continued at the start of the week in the Far East, where the Japanese Nikkei Index fell by almost 3%. In Hong Kong, the Hang Seng Index fell by more than 1%.

The US dollar, which investors like to turn to as a safe haven in uncertain times, is clearly on the rise. The trade war is also fueling fears of inflation. This in turn argues against the US Federal Reserve lowering interest rates in the next 12 to 18 months.

The dollar-franc currency pair was trading at 0.9161 on Monday morning after 0.9106 francs late Friday evening. The euro-dollar pair traded at 1.0238 after 1.0374 dollars.

Fear of high interest rates

From Tuesday, the US will impose 25% tariffs on imports from neighboring Mexico and Canada, and 10% on energy imports from Canada. An additional 10% will also be imposed on all imports from China.

The European Union could be next. President Donald Trump said this when asked whether he would also impose tariffs on products from the EU. This could also affect Swiss industry, as it supplies a large proportion of its goods to the EU.

Trump’s decision is the first blow in a potentially very destructive global trade war, according to a commentary by Capital Economics. Imports from the EU are likely to be affected in the next one to two months and a general tariff will be introduced in April. The high tariffs will also raise inflation concerns in the US and around the world.

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Translated from German with DeepL/mga

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