Stock markets cautious as Trump signals new tariffs

Stock markets in the Asia-Pacific region gave up their gains in early trading after U.S. President Donald Trump said he was considering new tariffs on Mexico and Canada.

Earlier, stock markets opened higher, buoyed by Trump's inaugural address in which he promised a new "golden age" for the U.S. He pledged an ambitious agenda including trade reforms, tax cuts, and reduced government regulation, measures that have the potential to boost corporate profits.

However, some economists have warned that these measures could also lead to increased inflation, which could in turn force the Federal Reserve to raise interest rates. "We are considering a 25% tariff on Mexico and Canada because they are allowing massive amounts of people to pour in, and Canada is also a very bad abuser and allows massive amounts of fentanyl to pour in," Trump said in the Oval Office.

During his campaign, he also promised a 10% tariff on all imports entering the U.S., and said he would impose a 60% import tax on China. Trump stated that tariffs would make Americans richer, although critics argue that these costs would likely be passed on to consumers. The President also said he would create an "Outward Revenue Service" to collect all tariffs, taxes, and revenues from foreign countries.

On Tuesday morning, Japan's Nikkei 225 index was up 0.1%, South Korea's Kospi was down 0.1%, and Australia's ASX 200 was up about 0.6%. Meanwhile, the U.S. dollar recovered some ground against other major currencies, including the British pound and the euro. "Market sentiment took a hit during President Trump’s signing of executive orders in the Oval Office," said Tim Waterer, chief market analyst at financial services firm KCM Trade. "Investors heard more explicit details of Trump's tariff agenda, which somewhat undermined market sentiment." U.S. markets were closed on Monday for Martin Luther King Jr. Day.