The imposition of tariffs by the US on imports from Canada, Mexico, and China has sent ripples through global markets, with investors flocking to the dollar as a safe haven amidst escalating trade tensions. The tariffs are expected to stoke inflationary pressures, supporting higher US interest rates and further bolstering the dollar. Equity markets across the US, Europe, and Asia-Pacific have tumbled due to fears of reduced global trade and potential economic slowdown. The introduction of these tariffs has also heightened inflation concerns, leading to increased yields on shorter-term securities like two-year US Treasuries, while haven bets on longer-term securities have resulted in a drop in yields.
In the energy sector, the tariffs have sparked a surge in the price of US benchmark West Texas Intermediate (WTI) crude. The levies on imports from Canada and Mexico threaten to disrupt North America's tightly integrated oil market, potentially pushing up gasoline prices for American motorists. This potential disruption has seen the discount of WTI to Brent narrow, reflecting concerns over US oil supply.
As of 00:10 on February 3, WTI crude is trading at $73.91, up from its last close of $72.53. The market is closely watching the unfolding trade tensions, with significant financial market volatility expected as participants adjust to the new trade policy landscape.