Trump's new tariffs rattle global markets, bolster Russia

International markets are still reacting strongly to Donald Trump's decision. The President of the USA implemented 25% tariffs at midnight between Monday and Tuesday on all goods imported from Mexico and Canada (excluding Canadian crude oil, which is subject to a 10% tax) and increased tariffs on products from China from 10% to 20%. According to economist Scott Lincicome from the Cato think tank, this is one of the most significant single tax increases in U.S. history, estimated at around £300 billion. This decision affects the three most important trading partners of the United States, which could have significant implications for both the American and global economies.

The U.S. decision is unfavourable for most markets. The German DAX index fell by more than 1.5% to below 22,800 points, retreating from its record level reached the previous day.

Among the worst-performing companies on the German market were BMW (-3.5%), Stellantis (-3.5%), Mercedes-Benz (-2.8%), and Volkswagen (-2.4%). Meanwhile, shares of defence sector companies continued to rise after President Trump suspended all military aid to Ukraine. Ursula von der Leyen, the President of the European Commission, presented a defence plan that could mobilise nearly €800 billion (£690 billion) for Europe.

The French CAC 40 index lost 1%, falling to 8,117 points on Tuesday, moving away from the nearly record level achieved during the previous session. Investor sentiment worsened due to new U.S. tariffs on Canada, Mexico, and China. Stellantis NV's shares performed the worst among individual companies, falling by 4.1% to their lowest level in two months.

Luxury goods sector companies also performed poorly – Kering dropped by 2.6%, LVMH by 2%, and Hermes by 1.6%. In contrast, shares of defence company Thales rose by 10.3%, reaching a new all-time high. The company exceeded profit expectations for 2024 and raised its sales and profitability forecasts for 2025.

In the American market, futures contracts stabilised on Tuesday after a turbulent start to the week. In Monday's regular trading session, the Dow Jones index fell by 1.48%, the S&P 500 by 1.76%, and the Nasdaq Composite by 2.64%. The main indices initially opened higher but quickly changed direction in the afternoon when President Trump confirmed that the 25% tariffs on Canada and Mexico would take effect on Tuesday, stating that "there is no more room" for negotiations.

On the U.S. technology market, large-cap companies suffered the biggest losses, such as Nvidia (-8.7%), Tesla (-2.8%), Microsoft (-2.1%), Amazon (-3.4%), and Broadcom (-6.1%).

Stock prices are not only affected by tariff decisions. Investors are currently concentrating on upcoming financial reports from companies like AutoZone, Best Buy, CrowdStrike, and Target, which are expected to be released on Tuesday.

While Western markets face challenges, the MOEX Russia index remained steady at 3,300 points in February, reaching its highest level since May last year. Russian assets show strong momentum.

Russian investors' hopes may stem from a single source. U.S. officials have adopted a more conciliatory tone toward Russia and criticised Ukraine's approach to wartime law, increasing expectations that the U.S. might lift sanctions and reintegrate Russian capital markets into the global financial system. Gazprom shares have risen by over 70% since reaching record lows in November last year, while Sberbank, Rosneft, and Lukoil have also hit six-month highs.