Rapid-fire trade and regulations from the US keep markets on their toes

Global stock markets have had a challenging time reacting to the speed and pace of executive orders coming from returning U.S. President Donald Trump’s administration, particularly when it comes to tariffs and regulation.

Within hours of coming into office, Trump revoked nearly 80 executive actions of former President Joe Biden and issued many more of his own. According to the Federal Register, Trump had signed 45 executive orders to date by February 5^th.¹

These orders cover a wide range of policy areas, including education, military and defence, AI and technology, and more. But for markets, it’s the beginning of the much-publicised “trade war” with allies and opponents alike, and the promised bonfire of regulation that are most pertinent.

Opening volleys in a trade war?

At the start of February, Trump announced tariffs on Mexico, Canada and China on a Saturday, imposing a 10% tariff on Chinese goods and 25% for his neighbours.² All three countries immediately said they would retaliate with tariffs on US goods, in what looked to be the start of a trade war.

But by Monday, he had already agreed to postpone the tariffs on Mexico and Canada when they offered more robust border defences. President Claudia Sheinbaum sent thousands of national guard troops to man the border, to “prevent drug trafficking from Mexico to the US, in particular of fentanyl”.³

Canadian President Justin Trudeau also agreed to beef up security at the border. In a statement on X, he said; “Canada is implementing our $1.3bn border plan – reinforcing the border with new choppers, technology and personnel, enhanced coordination with our American partners, and increased resources to stop the flow of fentanyl. Nearly 10,000 frontline personnel are and will be working on protecting the border.”⁴

But the concessions weren’t fast enough to completely stop market jitters. Wall Street opened sharply lower, with the S&P 500 falling by almost 2%, before recovering after Mexico and the US announced a month-long pause to allow for negotiations. The S&P 500 finished down 0.8% and the tech-focused Nasdaq was down 1.2%. The Dow Jones industrial average briefly broke out of the red to trade marginally higher, before closing down 0.3%. ⁵

Earlier in the day in London, the FTSE 100 share index shed 1.4% from last Friday’s record high, before clawing back some of its losses to trade down 1%. Germany’s DAX index fell by 1.5%, while France’s CAC 40 was down by 1.2%. Spain’s IBEX dropped 1.2% and Italy’s FTSE MIB lost 0.7%.⁶

Tariffs remain against China, who has said it will file a lawsuit, citing serious violations of World Trade Organisation rules.⁷ China also announced retaliatory tariffs of 10-15% on a US LNG, coal, crude oil and farm equipment, as well as export controls on rare metals. Other moves included opening an investigation into Google and adding two US firms to its national security blacklist.⁸ China’s tariffs are relatively minor in comparison to Trump’s sweeping program, but they are likely to cause some short-term economic pain on the US while sparing their own consumers.⁹ They also imply the possibility of longer-term damage as US ramps up its LNG production again.

Meanwhile, Trump also made it clear that he is considering tariffs against the EU, saying; “It will definitely happen with the European Union, I can tell you that, I wouldn’t say there’s a timeline but it’s going to be pretty soon.”¹⁰ Driving deregulation

Trump came to power promising to deregulate business and drive growth, and quickly signed an executive order to that effect, promising to “unleash prosperity through deregulation”.¹¹ The Order requires that whenever an agency issues a new rule, regulation, or guidance, it must identify at least ten existing rules, regulations, or guidance documents to be repealed.

Even before that order, the Bank of England had announced a delay on the implementation of Basel III as it waited to see how the Trump administration would implement the agreement. The stricter capital rules have now been pushed back until January 2027.

The Prudential Regulatory Authority announced on January 17^th; “Given the current uncertainty around the timing of implementation of the Basel 3.1 standards in the US, and taking into account competitiveness and growth considerations, the PRA, having consulted with HM Treasury, has decided to further delay implementation of the rules.”

The EU Commission has not delayed the full process, but in June, it separated out the start date for the Fundamental Review of the Trading Book (FRTB) piece and delayed its implementation until January 2026. However, it has already started implementing some of the rest of the rules and cannot change that without further legislation.¹²

The wider picture

While these are the rules that have the most immediate impact, Trump’s orders on cryptocurrencies, environmental rules, his push for AI supremacy, and other orders are all further elements that market watchers are struggling to keep up with. The sheer pace with which orders are issued and then rescinded, delayed or challenged in the courts makes it a dizzying time for market watchers.

Bankers at JPMorgan Chase have set up a “war room” to assess the impact of the orders, according to head of asset and wealth management Mary Callahan Erdoes, speaking at a panel discussion at the World Economic Forum in Davos.¹³

Financial institutions will see both opportunities and challenges in the fast-moving markets, but having the right information at the right time will be more important than ever.

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