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(Bloomberg) — Markets are likely to remain pressured as traders reassess their positions after President-elect Donald Trump announced he would impose trade levies on Mexico, Canada, and increase tariffs on China.

Asian currencies like the Korean won and Thai baht, which are seen as proxies to China sentiment, are likely to underperform, market participants said. Chinese, Mexican and Canadian stocks are also set for declines, particularly those with large exports to the US, they said. 

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Here’s what analysts and strategists in Asia had to say: 

Andrew Ticehurst, a senior rates strategist at Nomura in Sydney: 

“Tariff talk raises global inflation fears, creates concerns around global growth and increases geopolitical uncertainty. The knee-jerk reaction in markets is a stronger US dollar, higher yields and weaker equities”

“It’s curious that Trump appears to be putting Canada and Mexico near the top of his trade-target list, especially given there is a trade agreement between the three countries (USMCA). Our US team note Trump could use emergency powers to try to push through tariffs on Canadian and Mexican goods, but we’d think there would be some decent possibility of a court challenge should Trump proceed with that”

Firm Greenback

Carol Kong, a currency strategist at Commonwealth Bank of Australia in Sydney: 

Markets are on alert for more tariff headlines and “this uncertainty over US trade policy will keep markets heavy, so expect AUD and others to at least hold onto their declines,” she said. “Trump’s threat of even more tariffs will give another leg up to the US dollar. Aussie and kiwi will be dragged down because of their links to the Chinese economy” 

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Mahjabeen Zaman, head of FX research at ANZ Banking Group in Sydney:

We “will likely see the dollar remain firm for now, as markets absorb this news in the short term. However, we can’t fully discount year end seasonality for the US dollar which may see some marginal paring of the dollar rally. But general bias remains positive dollar, though I’d argue much is already in the price now”

Asia FX to Underperform

Kiyong Seong, a macro strategist at Societe Generale in Hong Kong: 

“Even the the US administration will phase tariffs with rate and coverage, the market tends to front-load the future tariff move in our view. We still believe there will be differed impact on EM currencies, depending on individual tariff level and expect yuan underperformance in EM Asia FX universe”

Alex Loo, a macro strategist at Toronto-Dominion Bank in Singapore: 

The initial effect of Trump’s announcement is “is bullish the US dollar, reflecting the impact of global trade tensions and associated tariff jawboning. Given the prospects of a disruption to the status quo, we can expect currencies in Asia to underperform, especially Korean won, Taiwan dollar and Singapore dollar given the trade-oriented nature of their economies.”

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Mitul Kotecha, head of Asia FX & EM macro strategy at Barclays in Singapore:

“EM and Asian FX, especially trade related currencies have been dealt a blow from President elect Trump’s tariffs comments this morning and may trade on the backfoot in the near term. It will clearly add to the pressure on the yuan and related proxies. China sensitive currencies such as Korean won, Taiwan dollar and Thai baht are particularly at risk”

PBOC to Support Yuan

Frances Cheung, strategist at Oversea-Chinese Banking Corp

“Expect to see the fixing and CNH liquidity being deployed to smooth spot movements. China government bonds may benefit from some safe haven flows.”

China Stocks Pressured 

Rajeev de Mello, a global macro portfolio manager at Gama Asset Management SA

“It demonstrates that tariffs will be the preferred instrument to implement foreign policy. I would expect Chinese equities to come under further pressure as the timing of this announcement is earlier than expected. The President-elect did not even need to wait for his inauguration to start implementing his campaign promises”

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Lynn Song, Greater China chief economist at ING Bank in Hong Kong:

“The immediate impact will likely be negative on the currencies and equities for China, Mexico, and Canada. Companies with high exposure to the US market will be disproportionately affected.”

“This round of tariffs is motivated by fentanyl imports, and the objective is to get China and Mexico to help halt the imports of fentanyl. This indicates that there is room for negotiation moving forward on tariffs, and in our view indicates that we are less likely to see an immediate 60% blanket tariff on China.”

—With assistance from John Cheng, Betty Hou and Shulun Huang.

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