Global stocks face uncertainty amid Trump trade war

Wall Street rebounds after Trump says motor tariffs are delayed

Traders on the floor of the New York Stock Exchange after the Trump administration imposed tariffs on Mexico and Canada. AFP

US stocks rebounded on Wednesday after back-to-back losses, as global markets face uncertain times since President Donald Trump ushered in a new trade war this week.

Wall Street rose after the White House granted a one-month exemption on motor tariffs on Canada and Mexico. White House press secretary Karoline Leavitt said the delay was granted so motor vehicle makers "are not at an economic disadvantage".

The Dow Jones Industrial Average rose 485.60 points, or 1.14 per cent, on Wednesday after losing more than 1,300 points in the previous two trading sessions. The S&P 500 and Nasdaq Composite rose 1.2 per cent and 1.46 per cent, respectively.

Hopes for wider relief were dashed after Mr Trump held a phone call with Canadian Prime Minister Justin Trudeau. Mr Trump accused Canada of "not doing enough" to counter the flow of fentanyl into the US but said the call ended in a "'somewhat' friendly manner".

Asian stocks rose, with China, the world’s second largest economy, announcing a bullish growth target for this year despite an escalating trade war with the US.

Shanghai’s blue-chip CSI300 Index was up 0.45 per cent when trading closed, while Hong Kong’s Hang Seng gained 2.84 per cent. Shanghai’s composite index also gained 0.53 per cent.

Elsewhere in Asia, Japan’s Nikkei rose 0.23 per cent, South Korea’s Kosdaq Index was up 1.23 per cent and India’s BSE100 also gained by 1.39 per cent.

In the Middle East, Dubai’s DFM general index was down 0.77 per cent and Abu Dhabi’s FTSE ADX general index was trading lower by 0.36 per cent. The Saudi Tadawul all share index was also down by 0.28 per cent.

“The Chinese government has set its growth target for the year at 5 per cent, in line with 2024, even as it faces an escalating trade war with the US, raising expectations of further stimulus to come,” Daniel Richards, senior economist at Emirates NBD, said in a note on Wednesday.

Premier Li Qiang, in a speech at the opening of the annual meeting of China's parliament, outlined Beijing's plans to issue 1.3 trillion yuan ($179 billion) in ultra-long special Treasury bonds this year, up from 1 trillion yuan last year.

Separately, Beijing plans to raise 500 billion yuan to recapitalise major state banks, according to a Reuters report.

Economists generally say that tariffs will increase costs for consumers, lead to higher inflation and slow economic growth.

Mr Trump's tariffs on imports from Mexico and Canada took effect on Tuesday, along with a doubling of duties on Chinese goods to 20 per cent.

Retaliatory measures were announced by Canada, which has imposed 25 per cent tariffs on imports including orange juice and motorcycles, while China has imposed 15 per cent tariffs on a range of US agricultural exports. Mexico has said that it will also respond.

“Trump’s tariffs went live yesterday, sending global markets – including the US indices – tumbling, until rumours of a potential rollback started circulating,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“High volatility is driving investors toward safe havens like bonds and gold, while the Trump-fuelled rally in the US dollar index has already reversed.”

European stocks also closed higher on Wednesday on hopes that Mr Trump would ease his tariffs. Frankfurt's DAX Index was up 3.5 per cent while the Paris CAC also rebounded, gaining 1.56 per cent. The UK's FTSE 100 was near flatline, falling 0.04 per cent.

The dollar index closed down 1.34 per cent, with the greenback closing down against most major currencies, while the euro strengthened by 1.55 per cent to 1.0791, “boosted by German plans to amend its constitution in order to boost defence spending”, Mr Richards said.

In commodities, oil was trading lower on Wednesday, with Brent, the benchmark for two-thirds of the world’s oil, down 2.53 per cent at $69.24 a barrel, and West Texas Intermediate down 3 per cent to $66.61 a barrel at 1.23am UAE time.

The announcement that additional production cuts from some Opec+ members would be rolled back in part from April is weighing on global oil prices, along with a heightened concerns about what a trade war would mean for global demand.