Just as that relief set in through the day, however, prompting one of the biggest drops in the dollar index of the year and rallies in European and Chinese stocks, Trump later responded to questions by saying he was thinking of 25% tariffs on Mexico and Canada from Feb. 1, blaming a lack of action by both countries on flows of illegal migrants and fentanyl.
However, he also suggested his plans for a universal tariff on all U.S. goods imports were not yet in the works. "We may. But we're not ready for that yet," Trump said.
The upshot was that Monday's rallies in Mexico's pesoand the Canadian dollar were almost entirely reversed and half of the euro's jump was wiped. China's offshore yuan, which had staged its biggest one-day rise since August on Monday, gave back almost half of that move too.
European stocks, which had advanced on Monday, were flat earlier today and mainland Chinese stocks also stalled after giving up early gains of almost 1%. Hong Kong's Hang Seng, however, closed 0.9% up on the day.
In a presidential memo, Trump directed Commerce and Treasury departments and the U.S. Trade Representative to probe the economic and national security risks of large trade deficits and "recommend appropriate measures, such as a global supplemental tariff, or other policies, to remedy such deficits".
The memo called for the USTR to assess China's performance under the "Phase 1" trade deal he signed with Beijing in 2020 to end a nearly two-year tariff war.
For Wall Street stocks returning after the Martin Luther King holiday on Monday and in the thick of the fourth-quarter earnings season too, the overall picture appears to remain positive and index futures were up to 0.5% up before Tuesday's bell. Netflix tops the corporate diary later.
Encouraged by the equivocation on tariffs and the rather vague prioritisation of anti-inflation measures, 10-year U.S. Treasury yields extended last week's retreat to hit their lowest since Jan. 2. But with 2-year yields backing up a touch to 4.25%, the 2-to-10-year yield curve gap narrowed to its flattest for the year.
Dampened by Trump's repeated push on more oil drilling and U.S. self-sufficiency in oil and gas, the retreat of U.S. crude oil prices to their lowest in 10 days helped improve the mood in bonds too - reinforcing the more benign view of underlying inflation that saw Treasuries bounce last week.
However, not much in Trump's first day seemed to alter market thinking on the Federal Reserve. Another quarter-point cut remains priced by midyear and futures see a 60% chance of a second move of that magnitude later in the year.
