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Gold gains and stocks fall after Trump tariffs on Canada

Global stocks dropped on Friday as U.S. president Donald Trump escalated his tariff war against Canada. This left Europe in the firing lines, causing a modest investor rush to safe havens such as gold. Bitcoin also hit a record high.

The Canadian dollar dropped after Trump sent a late-night letter on Thursday stating that a 35% duty rate would be applied to all imports coming from Canada starting August 1. He also stated that the European Union will receive a similar letter on Friday.

The U.S. President, whose global tariff wave has disrupted businesses and policymaking, proposed a 15% or 20% blanket tariff rate for other countries. This is an increase from the 10% baseline rate. He surprised Brazil this week, which has an excess of trade with the United States. He imposed duties of up to 50% on copper, pharmaceuticals, and semiconductor chips.

The markets have not reacted to the current volatility, with the exception of a few pockets of volatility, whether in currencies, commodities or stocks. In fact, the VIX volatility indicator is at its lowest level since late February.

In Europe, STOXX 600 fell 0.7%, despite a 2.2% increase this week. Futures for the S&P 500, Nasdaq and Dow fell by 0.6%. This indicates that the record highs of this week will be retreated at the opening later.

Fiona Cincotta, City Index's strategist, said that the market was becoming numb. It may not be until hard data is presented to show an impact before we start to see a reaction.

"Clearly, we are getting more information that brings with it a certain clarity. "Because there is so many uncertainties, there's still the idea that Trump is open to negotiations, nothing feels final yet," she said.

The Canadian dollar increased 0.3% to C$1.3695. The euro, whose value has dropped by nearly 1% since the beginning of July, fell 0.2% to $1.1683.

Trump had earlier in the week pushed back to August 1, his deadline for tariffs for many trading partners, to give more time for negotiation. But he also expanded his trade war by setting new tariffs for several countries, including Japan and South Korea. He also imposed a 50% copper tariff.

Joseph Capurso is the head of international economy at Commonwealth Bank of Australia. He said that the 35% tariff rate on Canada wasn't as bad as people thought because the United States, Mexico, and Canada Agreement (USMCA) still allows for exemptions to be applied to most imports.

Capurso stated, "Now we don't yet know the tariff rate on EU imports... that's what's not known as yet." "If we get something like (the U.S. - China trade war in April), it's going be very destabilising."

Wall Street indexes closed at record highs Thursday, as AI chip maker Nvidia smashed records by achieving a market value of over $4 trillion.

Gold has risen for the third consecutive day, rising 0.6% to $3342 per ounce. This brings July's gains to 1.2%. Treasuries received less of a boost as a safe haven, due to investor concerns about the long-term stability of U.S. government finance. This led to a selloff which pushed up yields.

Benchmark 10-year yields increased 3 basis points, to 4.38%. This is in addition to the rise of Thursday on the backs of data showing that jobless claims fell unexpectedly last week.

As the chances of a U.S. - Japan trade agreement dimming, the yen has steadily weakened. The dollar rose 0.4% to 146.76yen on Friday, resulting in the largest weekly gain this year of 1.6%.

Bitcoin has risen by 3.8%, to $117.880. This is the highest ever.

Investors will closely monitor the second-quarter earnings of corporations next week in order to assess the impact of Trump’s tariffs that began on April 2. JPMorgan Chase will release its results on Tuesday. This marks the beginning of the reporting period.

Brent crude fell by nearly 2% to $68.88 per barrel, continuing the day's decline.

(source: Reuters)