The Paris Stock Exchange is facing a significant decline due to new U.S. tariffs on imports from Canada, Mexico, and China, raising fears of a trade war. The CAC 40 futures dropped sharply, reflecting investor anxiety. In retaliation, Canada and Mexico are preparing counter-tariffs, while Beijing opposes the U.S. actions. Global markets are reacting negatively, with declines in indices like the Nikkei, and a flight to government bonds is seen as risk aversion grows.
Paris Stock Exchange Faces Significant Decline
The Paris Stock Exchange is set to open with a notable drop on Monday morning, prompted by the United States’ announcement of new tariffs on imports from Canada, Mexico, and China. This decision brings back the looming threat of a potential trade war.
At approximately 8:15 AM, the futures contract for the CAC 40 index, expiring at the end of February, fell sharply by 186 points to 7778 points, signaling a challenging start to the trading day.
Global Reactions to U.S. Tariffs
U.S. President Donald Trump declared over the weekend the introduction of new tariffs: a 25% levy on goods imported from Canada and Mexico, and a 10% tariff on products from China. In retaliation, Canadian Prime Minister Justin Trudeau has announced counter-tariffs of 25% on various U.S. imports, including alcohol, clothing, household appliances, and wood.
Mexican President Claudia Sheinbaum has also indicated that her country is preparing to implement similar countermeasures against the U.S. Meanwhile, Beijing has voiced strong opposition to the U.S. tariff actions, pledging to take necessary steps to safeguard its interests.
Concerns are mounting among investors that the escalating tariffs from the U.S. and its trading partners could impede the robust global economic growth witnessed lately. Despite a strong start to the year for global stock markets, the intensification of trade disputes may compel investors to shift away from riskier assets towards safer alternatives.
In a reflection of the rising anxiety in financial markets, the Nikkei index experienced a decline of over 2.7% on Monday, marking a total decrease of 3.6% since the beginning of January.
The trade tensions also pose additional challenges for the delicate monetary policy landscape in the United States. In light of the uncertainty surrounding the Trump administration, Jerome Powell, the Fed chairman, chose not to address potential rate cuts during his address last Wednesday.
On Wall Street, futures for major New York indices are currently down between 1.5% and 2.5%, suggesting a likely negative opening across the Atlantic. Additionally, political risks in France are adding to market concerns, with Prime Minister François Bayrou’s government planning to invoke Article 49.3 to advance its budget proposal, risking a vote of no confidence.
The week will also feature key earnings reports from major companies like Alphabet (set for Tuesday evening) and Amazon (on Thursday), along with the release of U.S. employment figures for January on Friday.
The resurgence of trade issues has triggered a flight towards government bonds, resulting in the yield on the 10-year U.S. Treasuries—a key market indicator—dropping to approximately 4.52%, a level not seen in over a month.
Trump’s tariff strategies appear to be supporting the dollar, which is gaining strength against the euro after a period of relative stability last week. The euro has dipped below the 1.0250 threshold against the dollar, edging closer to the multi-year lows recorded last month.
As risk aversion returns, gold, traditionally viewed as a safe haven, remains elevated at $2818.7 per ounce, although the dollar’s strength is causing some consolidation in gold prices.
In the oil market, U.S. light crude (West Texas Intermediate, WTI) is experiencing an upward trend, rising by 2% to $74, despite the impact of tariffs on Canadian energy products, which are anticipated to affect demand. North Sea Brent is following this trend, increasing by 1.1% to $76.5.