Trump's Second Week: Tariffs and Anti-Immigration Policies Intensify! U.S. Stocks Fall, Dollar Rises

After the "loud thunder but little rain" tariff threats in the first week, Trump has taken concrete action.

According to CCTV News, on January 26 local time, U.S. President Trump stated that Colombia's refusal to accept deportation flights for illegal immigrants would result in a 25% emergency tariff on all goods entering the U.S. from Colombia, which would increase to 50% within a week.

Subsequently, on January 26 at noon local time, the Colombian presidential palace issued a statement announcing the decision to send a presidential plane to bring back Colombians who would be deported by the U.S.

Affected by the tariff news, the U.S. dollar started the week with a slight increase. The dollar rose about 0.2% against the euro, with smaller increases against the Australian and New Zealand dollars, while the Mexican peso fell by 0.3%.

Last week, due to Trump's first week being dominated by verbal threats with little actual action, the dollar recorded its worst week in 14 months, while currencies in Eastern Europe and Latin America rose, marking the best week for emerging markets since July 2023.

"Actions speak louder than words. The situation in Colombia indicates that Trump can easily use tariffs as a negotiating tool," said Dane Cekov, senior macro and forex strategist at Oslo Sparebank 1 Markets AS. "There will be more measures regarding tariffs, and the dollar's rebound is far from over."

U.S. Stocks Respond with Declines

Trump's tariffs and anti-immigration stance have also put pressure on U.S. stocks.

U.S. stock futures fell early Monday in Asia, with Nasdaq 100 futures down about 1.2%, S&P 500 futures down 0.5%, and Dow futures down 0.2%.

Analysts believe that Trump's immigration policies could have a devastating impact on the growth and earnings of U.S. companies, as large-scale deportations could disrupt industries such as services, leisure, labor-intensive agriculture, food production, manufacturing, and construction.

However, last week, although the Trump administration declared a national emergency at the southern border and began deporting individuals back to Central America, it did not carry out large-scale deportations or mass workplace raids.

Wall Street thus harbors a glimmer of hope, believing that Trump will not fully implement his plans. Some investors even expect that Trump will use the stock market as a benchmark to avoid policies that hinder economic growth and depress stock prices.

Restaurant operator Yum! Brands Inc. rose 2.4% in Trump's first week, recovering losses from January. Building materials manufacturer Owens Corning increased by 3%, while hotel and resort operators saw slight declines.

But the market may be playing a dangerous game of expectation gaps.

Mark Malek, chief investment officer at Siebert, warned: "If we are talking about rapidly deporting 10 million people, although the impact may not be as severe as during the pandemic, it would still be significant. This could have painful effects on employment, inflation, and the economy." According to an analysis by Bloomberg Economics, deporting all undocumented immigrants would reduce the U.S. Gross Domestic Product by 8%. Labor-intensive industries such as agriculture and construction would struggle to find workers, and inflation could soar.

Investors are closely monitoring several industries that may be affected by immigration policies:

Hotel and fast-food industry: Companies like Host Hotels & Resorts Inc. and Yum! Brands Inc., which rely on low-skilled labor, may face pressure from rising labor costs.

Food production and building materials: Companies such as Tyson Foods Inc. and Owens Corning may suffer from labor shortages and rising wages.

Technology industry: Plans to restrict H-1B visas could impact companies like Cognizant Technology Solutions Corp., Amazon, and Meta that rely on high-skilled foreign workers