Donald Trump threatened to put massive tariffs on Colombia in retribution for its refusal to accept deportation planes from the United States, which caused Asian markets to generally fall on Monday due to new trade concerns.
Amidst concerns that a recent boom in the field would be questioned and assertions that a new, less expensive Chinese generative AI programme can surpass well-known competitors, traders were also evaluating the program’s effects.
Since Trump 2.0 refrained from enacting harsh tariffs on China and other allies as soon as he took office, despite his declarations to the contrary, stocks saw a strong surge last week on the expectation that he would adopt a more lenient stance towards international trade.
His remarks that he would “rather not” strike Beijing, together with an indication that he was amenable to a trade agreement, contributed to the upbeat atmosphere.
But on Sunday, he announced that he would revoke government officials’ visas and impose a 25% levy on Colombian imports, which would increase to 50% the following week.
The action was taken in response to President Gustavo Petro’s blocking of American deportation aircraft.
Petro first declared retaliatory taxes of 25% on U.S. imports in response to Trump’s decision.
Luis Gilberto Murillo, the foreign minister, claimed that they had “overcome the impasse” when Bogota eventually gave in and agreed to take in the exiled residents.
According to Dane Cekov of Sparebank 1 Markets, “Actions are more powerful than words. Trump can use tariffs as a negotiating tool with minimum effort, as demonstrated by the Colombian scenario.”
In anticipation of the Federal Reserve’s first policy meeting of the year, traders were already preparing for a busy week.
Investors will be closely monitoring the Federal Reserve’s statement and remarks from Jerome Powell, even though it is generally anticipated that rates will remain unchanged.
Concerns have been raised that Trump’s promises to impose tariffs while cutting immigration, taxes, and regulations may cause inflation to spike again, forcing the central bank to halt or possibly raise rate reductions.
The dollar gained almost 1% versus the Mexican peso as a result of the move against Colombia, which also caused it to rise against most of its rivals. Gold, a refuge in uncertain times, was on the verge of hitting a new high.
“With major inflation reports and expected Fed guidance, this crucial week begins in Asia, setting the stage for a global market spectacle that is intensely focused on the unfolding of… Trump’s economic agenda,” said Stephen Innes of SPI Asset Management.
Markets were anticipating “a torrent of earnings reports from companies constituting nearly 40% of the S&P 500’s market capitalisation,” he continued.
“Their results may either reinforce the recent bullish upswing or prompt a reassessment of market sentiments.”
All three main indexes on Wall Street dipped Friday, with the S&P 500 off a record high on profit-taking and as IT businesses took a knock following the introduction of the DeepSeek AI programme last week.
The firm says only $5.6 million was spent building the model.
Since tech giants like Nvidia, Meta, and Alphabet have made massive investments in AI products totalling hundreds of billions of dollars, the program’s arrival has raised concerns about competition.
Trump’s announcement of a new $500 billion project to develop artificial intelligence infrastructure in the US also followed it.
