Asian stocks struggled while the U.S. dollar edged higher on Monday following President Donald Trump’s announcement of imminent tariff hikes on steel and aluminum imports. The move could stoke inflationary pressures and potentially limit the Federal Reserve’s ability to cut interest rates further.
U.S. Tariffs and Market Response
Speaking aboard Air Force One, Trump stated that the U.S. would impose a 25% tariff on all steel and aluminum imports, with additional reciprocal tariffs set to be unveiled within days. The announcement came shortly after German Chancellor Olaf Scholz warned that the European Union was prepared to retaliate swiftly should U.S. tariffs target European goods. China, too, is set to implement retaliatory tariffs on certain U.S. exports starting Monday.
“Nearly half of U.S. imports serve as inputs for domestic companies, meaning businesses will either have to pass higher costs to consumers, absorb lower margins, or adjust supply chains entirely,” said Stephen Dover, head of the Franklin Templeton Institute.
Investors are concerned that an escalation in tariffs could further fuel inflation, potentially restricting the Fed’s flexibility to ease policy. Markets have already dialed back expectations for rate cuts this year, pricing in only 36 basis points of reductions compared to 42 basis points before Friday’s strong payrolls report.
Impact on Currency and Equity Markets
The dollar strengthened on Monday, with the U.S. Dollar Index firming to 108.265. The euro dipped slightly to $1.0315, while the trade-sensitive Australian dollar fell to $0.6270. The Japanese yen weakened to 151.87 per dollar amid speculation that the Bank of Japan might raise interest rates in the coming months.
Stock markets across Asia reflected the uncertainty:

MSCI Asia-Pacific Index fell 0.3%

Japan’s Nikkei edged up 0.1%

South Korea’s KOSPI dipped 0.1%, dragged down by steel stocks

Chinese blue chips remained largely unchanged, helped by January’s consumer inflation data showing a five-month high

U.S. Market Outlook and Corporate Earnings
Wall Street futures initially opened lower but rebounded as investors focused on a busy week of earnings reports.

S&P 500 futures rose 0.3%

Nasdaq futures added 0.5%

While major stock indexes have been supported by strong corporate earnings, the uncertainty surrounding trade tensions and potential Fed actions remains a key concern. Investors will closely watch Federal Reserve Chair Jerome Powell’s testimony before Congress on Tuesday and Wednesday, where trade-related inflation risks are expected to be a major discussion point.
Investor Strategy Amid Tariff Concerns
With mounting trade tensions, investors are weighing their strategies carefully. Financial Modeling Prep’s Full Financials API (link) can help investors analyze company fundamentals and assess which industries may be most affected by tariffs.
Additionally, the Sector P/E Ratio API (link) provides insights into how sectors like industrials and materials are reacting to the news. Investors can also use the Price Target API (link) to track changes in analyst expectations due to evolving trade policies.
As markets digest the latest developments, traders and investors will need to stay informed and adjust their strategies accordingly to navigate the volatility ahead.