Asian stocks dropped on Monday morning after U.S. President Donald Trump implemented tariffs on Canada, Mexico, and China, fulfilling his earlier threat. Investors are concerned about the potential for a trade war that could hurt major companies’ earnings and slow global growth.
Canada and Mexico have announced plans for retaliatory tariffs, while China has vowed to take “countermeasures” and challenge the tariffs at the World Trade Organization. Trump has defended the tariffs, claiming they are needed to curb illegal drug flows and immigration into the U.S.
The Hang Seng Index in Hong Kong fell 1.3%, Japan’s Nikkei 225 dropped 2.4%, South Korea’s Kospi declined 3%, and Australia’s ASX 200 was down 1.8%. Mainland China’s markets remained closed for the Lunar New Year holiday.

The U.S. dollar strengthened, reaching a record high against the Chinese yuan, while the Canadian dollar plummeted to its lowest point since 2003.
Tim Waterer, chief market analyst at KCM Trade, noted that the potential for a prolonged trade dispute between the world’s two largest economies is prompting investors to reduce risk. He also mentioned that investors are concerned about which countries might be next on Trump’s tariff list.
Trump has threatened to impose tariffs on the European Union soon. Charu Chanana, chief investment strategist at Saxo, warned that while tariffs might provide short-term benefits for the U.S. economy, they carry long-term risks, such as encouraging other countries to reduce their dependence on the U.S., which could weaken the dollar’s global dominance.
Trump is set to speak with Canadian and Mexican leaders on Monday about the tariffs, which will go into effect at midnight on Tuesday. Canada and Mexico will face a 25% tariff on their exports to the U.S., while Chinese goods will incur a 10% tax.