Asian markets swing as Trump revives tariff fears on taking office

Asian markets saw big fluctuations Tuesday as Donald Trump took office warning he could impose stiff tariffs on Canada and Mexico next month but appeared to delay any action against China for now.

The new US president's announcement that the country's closest neighbours could be hit with 25 percent levies as soon as February 1 also jolted currency markets, with the Mexican peso and Canadian dollar tumbling.

His comments came amid the signing of a slew of executive orders that indicated he could resume his hardball approach to global diplomacy and trade, including pulling out of the Paris climate accord and the World Health Organization.

He also gave social media app TikTok 75 days to find a buyer for its US business, after it missed a deadline Saturday ordering its Chinese owners ByteDance to sell its US subsidiary to non-Chinese buyers or be banned.

"We're thinking in terms of 25 percent on Mexico and Canada, because they're allowing vast numbers of people -- Canada's a very bad abuser also -- vast numbers of people to come in, and fentanyl to come in," he said in the Oval Office.

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He had earlier said he would "immediately begin the overhaul of our trade system to protect American workers and families".

"Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens," he announced in his inaugural address.

Markets in Asia and Europe had enjoyed a healthy run-up Monday -- with Frankfurt hitting another record -- on hopes Trump would take a more gradual approach to trade policy, after news of positive talks with Chinese President Xi Jinping added to the optimism.

However, his warning to Ottawa and Mexico City dealt a blow to sentiment, sending most Asian markets into the red.

Shanghai, Singapore, Seoul, Wellington and Taipei fell while Tokyo was slightly higher but off earlier highs. Hong Kong also edged up with Sydney and Manila.

The dollar, which had weakened across the board Monday, bounced against its major peers, but its biggest gains were against the Mexican peso and Canadian dollar, with the latter at its weakest since the start of 2020 during the pandemic.

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Charu Chanana, chief investment strategist at Saxo Markets, said: "The tariff respite was short-lived, as expected, with the latest headline signalling that tariffs have been delayed but not averted.

"However, it seems like Canada and Mexico are in the focus but negotiation hopes are kept alive for China, suggesting China markets may still be supported."

Wall Street was shut Monday for the Martin Luther King holiday, but US stock futures were solidly higher.

Key figures around 0200 GMT

Tokyo - Nikkei 225: UP 0.1 percent at 38,951.50

Hong Kong - Hang Seng Index: UP 0.3 percent at 19,993.57

Shanghai - Composite: DOWN 0.3 percent at 3,234.21

Euro/dollar: DOWN at $1.0380 from $1.0404 on Monday

Pound/dollar: DOWN at $1.2284 from $1.2302

Dollar/yen: UP at 155.83 yen from 155.67 yen

Euro/pound: DOWN at 84.51 pence from 84.56 pence

West Texas Intermediate: DOWN 1.5 percent at $76.74 per barrel

Brent North Sea Crude: DOWN 0.1 percent at $80.11 per barrel

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New York - Dow: Closed for public holiday

London - FTSE 100: UP 0.2 percent at 8,522.41 (close)

Source: AFP