Global equity markets plummeted, to begin the new week, following announcements of US tariffs on Mexico, Canada and China. Trump revealed that they would become effective immediately, in an effort to control the borders and trade imbalances. Equity markets spiralled lower, as fears began to realise, on the trade front. The move to the safety of the US Dollar also gained ground, with the EUR crashing back towards 1.0200, while the GBP collapsed to as low as 1.2250. Later in the US trading day, Mexico announced an interim agreement with the US, allowing the suspension of tariffs for one month, while earnest negotiations continue. This was a relief markets, which rebounded strongly, following the news. The flexibility of tariff imposition and the finite duration offered hope for those fearing an all-out trade war. The Mexico solution may be a teaching moment for Canada, which had responded with tariffs and effected a trade war.The big moves to the safety of the US Dollar, hammered commodity currencies, although a recovery was underway following the Mexico/US interim agreement. The NZD had collapsed to trade down to 0.5520, but later recovered some lost ground, while the AUD broke below 0.6100. Trade exposed commodity Countries like Australia and NZ remain extremely vulnerable to any trade wars.
