Stocks and markets to watch as Trump Tariffs begin
US President Donald Trump is imposing significant new tariffs on Canada, Mexico and China. Here’s what you need to know.
US President Donald Trump is imposing a 25% tariff — a tax on imports — on all goods coming from immediate neighbours Canada and Mexico, apparently until the countries crack down on drug trafficking and illegal migration into the US. The Trump administration is also placing a 10% tariff ‘above any additional tariffs’ for goods coming from China until it reduces fentanyl smuggling.
To be clear, Trump has consistently advised he would be using tariffs in an attempt to grow the US economy, protect jobs and raise revenue. There is a chance that these tariffs are already priced into the markets — though many analysts thought the plan was a bluff.
Trump Tariffs impact in brief
It’s worth taking a moment to explain how tariffs work. A tariff is a domestic tax which is levied on goods when they enter a country — so for example, if a $100,000 car was imported into the US with a tariff of 25%, the domestic US-based company which imported the car would be liable for a $25,000 fee.
Extrapolate this to a larger scale, and you can see how increased US tariffs could massively impact the world’s economy. In 2023, the country imported $3.1 trillion of external goods worth some 11% of its Gross Domestic Product. Crude petroleum and cars are the top two imports by some distance — with many oil and automobile imports coming from Canda and Mexico.
For context, the US currently generates circa 2% — or $80 billion — of its total tax revenue from tariffs, but the economic burden of tariffs tends to fall on US consumers in the form of higher prices or on US companies in the form of lower profits.
However, the data indicates that most of the burden is borne through consumer price increases. And think tanks estimate that the new Trump tariffs could reduce middle-class incomes by between $1,700 and $3,900 per year, while also increasing inflation.
Of course, some economists consider that tariffs encourage domestic manufacturing and also enhance national security. But the 2018 steel tariffs didn’t increase steel jobs with employment in the sector remaining below pre-tariff levels — and downstream industries reliant on steel have been hit hard.
On the trade deficit point, Trump’s initial tariffs did not stop the US trade deficit increasing from $480 billion in 2016 to some $653 billion near the end of this first term in 2020, especially because the stronger US dollar made exports less competitive.
Finally, it’s worth noting that while Trump is going much further in his second term, the former Biden administration maintained many of Trump’s tariffs and even introduced new ones, including on EVs from China.
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Best Trump Tariff markets to watch
Here’s some of the best markets to watch as Trump imposes increased tariffs:
VIX
Unless the market has priced the effect of tariffs in — and in this market, it’s hard to rule anything out — investors may be likely to see significant volatility as the world digests the true impact of Trump’s new tariffs. The VIX (CBOE Volatility Index) measures the market's expectations for volatility over the next 30 days, making it perhaps the first port of call for traders in times of uncertainty.
The VIX is even referred to as the ‘fear gauge’ as it’s usually a decent barometer of investor sentiment. It’s derived from the implied volatility of near-term S&P 500 index options — such that when stocks fall, the VIX tends to rise. This also makes the index a popular hedging choice.
USD/CAD
Tariffs are almost certainly going to increase the strength of the US Dollar, but it’s the impact on other major currencies, including the Euro, Pound Sterling and the Australian Dollar that might upend global trade. The ‘Loonie’ currency pair — USD/CAD — is perhaps the most interesting forex market to watch as Canada is responding to Trump’s tariffs with 25% tariffs on CAD$155bn of US goods, but all being relative the Canadian Dollar may lose value compared to the US Dollar.
Canada is also considering specific tariffs on key goods produced in strong Republican states, which could create a new political dimension to forex trading.
Gold
Gold remains the real asset inflationary hedge of choice, but the precious metal now trades at a record high — arguably as a result of central bank buying — and it’s hard to know which way the trade will go next.
On one hand, if tariffs send inflation higher, gold’s role as an inflationary hedge could see demand rise and therefore it’s price. You will also see more market uncertainty, and tariffs could even make the US Dollar weaker over time if they slow economic demand — making gold more attractive as a safe haven asset, but also because it would become cheaper for foreign buyers.
On the other hand, tariffs could strengthen the US economy by boosting domestic production, and the US Dollar seems to be strengthening for now. And if inflation comes roaring back, then gold could become less attractive than bonds denominated in USD terms if their yields rise.
NASDAQ 100 futures
While the Dow and S&P 500 also opened down on Sunday night, NASDAQ 100 futures took the largest loss, opening some 600 points down — and is arguably the most exposed to weakening sentiment given the sky-high valuations of the Magnificent Seven tech stocks which dominate the index.
The volatility is only going to be exacerbated by earnings season — titans Alphabet and Amazon are both due to report back to investors this week. Given the seismic impact of China’s DeepSeek on the artificial intelligence sector, including both recriminations and accusations, investors are looking to China for retaliatory tariffs that may worsen the global mood.
iShares Semiconductor ETF
Many US-based semiconductor companies — including iShares MSCI Global Semiconductors UCITS ETF constituents Nvidia, AMD, Intel and Qualcomm — rely heavily on China for both manufacturing and sales. Tariffs on tech components could increase costs, disrupt supply chains, and impact revenue. Perhaps the most interesting effect might be on Taiwan Semiconductor Manufacturing Company (TSMC), which may be caught between a rock and a hard place.
Tariffs will doubtless see volatility in the semiconductor/artificial intelligence space, but longer term investors might see accelerated domestic production and increased US-based AI investments.
Tesla
With Tesla CEO Elon Musk championing Trump through his election campaign and running the new ‘Department of Government Efficiency,’ Tesla may be in for some turbulent times. The EV trailblazer could be hit hard by tariffs on auto parts imports, and beyond this, over the weekend former Canadian Finance Minister Chrystia Freeland suggested that the country could ‘impose a 100 per cent tariff on all Tesla vehicles.’
Given Tesla’s arguably weak quarterly results in January, any tariffs specifically aimed at the company in an effort to target Musk could prove highly damaging.
Trump Media & Technology Group
Trump’s ‘Trump Media & Technology Group’ social media app remains loss-making but given the global impact of the tariffs could see meme levels of trading activity this week. For context, traders bought up the stock in the run-up the election, but it has since sold off — and the odds are that this stock could be a top name on social media forms like Twitter and Reddit.
Be warned though that meme trading activity can be both very high risk and very unpredictable, with very few or even no fundamentals attached to price movements.
Alibaba
Alibaba is China’s answer to Amazon, and increased tariffs on the company could do some damage. For context, the new 10% tariff could remove the exemption for packages valued at under $800, which allows companies like Alibaba to ship goods directly to US consumers without incurring duties. The company may be hit twice though, because any Chinese tariff reaction could hit the other side of its business.
It's also worth noting that Alibaba very recently announced it had developed a new Chatbot that outpaces DeepSeek – which further complicates the investment.
Mining sector
This trade war is nothing new. Over the past few years, the USA has been (with limited success) attempting to prevent China from accessing its most advanced semiconductors in order to maintain an edge in the artificial intelligence arms race. China has responded (again, with limited success) by imposing export controls on various critical and defence minerals including a handful of rare earths, antimony and tungsten.
While the wider story may be that tariffs damage the global economy and cause the share prices of major titans like Rio Tinto and Glencore to struggle, it’s also worth noting that if China ups the ante, ex-China sources of critical minerals will become more desirable — and indeed, several US projects have either been granted or will soon be granted substantial grant funding to reduce US dependency on China.
Oil & Gas
Trump promised the electorate that as part of his plan to get inflation down he would ‘Drill, Baby Drill.’ If Canadian imports become significantly more expensive you might see oil prices rise in the short term, though Trump is planning to allow more oil and gas drilling on federal lands, by executing Scott Bessent's ‘3-3-3’ plan to increase US oil production by an addition 3 million barrels per day from the current record 13.3 million.
While the US is already the largest individual oil producer in the world, the lion’s share of production remains in the hands of the OPEC cartel and any signs given from this quarter will be closely watched — especially if it appears that the global economy, and therefore oil prices, starts to fall.
Trump Tariffs summed up
- US President Donald Trump is imposing a 25% tariff on all goods coming from immediate neighbours Canada and Mexico, and a 10% additional tariff on goods from China
- The US currently generates circa 2% — or $80 billion — of its total tax revenue from tariffs
- Some economists consider that tariffs encourage domestic manufacturing and enhance national security, though others argue the downsides far outweigh the potential positives
- Given the size and importance of the US economy, the impact will be worldwide, and the long-lasting effects are far from certain
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