BY NAVEEN THUKRAL
SINGAPORE- Prices of industrial metals and agricultural products took a hit on Monday as US President Donald Trump’s tariffs on Canada, Mexico and China sparked concerns over raw material demand and global economic growth.
Gold prices eased from record highs on a stronger US dollar, although trade tensions are likely to push prices of safe-haven precious metals higher, analysts said. Crude oil jumped on fears of supply disruptions.
“If the tariffs were to remain in place as announced indefinitely, they would represent an enormous negative shock for the Canadian and Mexican economies,” ANZ said.
“Base metals were also caught up in the wave of selling.”
Asian stocks slumped and US equity futures pointed sharply lower after Trump’s tariffs heightened worries over global economic growth.
In three executive orders, Trump imposed 25 percent tariffs on Mexican and most Canadian imports and 10 percent on goods from China, starting on Tuesday.
Canada and Mexico, the top two US trading partners, immediately vowed retaliatory measures, and China said it would challenge Trump’s levies at the World Trade Organization.
Copper slid to its lowest in four weeks as Trump’s tariff on imports from top metals consumer China raised uncertainty over industrial metals’ demand.
“The market is anticipating retaliatory measures, particularly from China, which could further impact metal prices negatively,” said Kelvin Wong, OANDA’s senior market analyst for Asia Pacific.
Corn dropped to its weakest in three weeks. Soybeans and wheat markets also lost ground.
While Mexico is the biggest importer of US corn, China is the No. 1 market for US soybeans. Mexico and China import several agricultural goods from the US including wheat.
However, US soybean oil prices rose to their highest in two weeks.
“Washington-Ottawa trade war is likely to reduce availability of Canadian rapeseed oil in the US market, which will push up demand for locally produced vegetable oil especially for making biodiesel,” said Pranav Bajoria, director at Singapore-based brokerage Comglobal Pte Ltd.
Gold fell nearly 1 percent after hitting an all-time high on Friday, as the dollar strengthened. But the downside in bullion is likely to be limited, according Tim Waterer, chief market analyst at KCM Trade, as it is considered a safe investment during periods of economic and geopolitical turmoil.
Oil prices jumped as tariffs on Canada and Mexico, the biggest sources for US crude imports, raised fears of supply disruptions.
Energy products from Canada will attract only a 10 percent duty, but Mexican energy imports will be charged the full 25 percent, White House officials said.
Together, the two countries account for about a quarter of the oil US refiners process into fuels such as gasoline and heating oil.
“Tariffs on Canadian energy imports would likely be more disruptive for domestic energy markets than those on Mexican imports and might even be counterproductive to one of the president’s key objectives – lowering energy costs,” Barclays analyst Amarpreet Singh said. — Reuters