Barclays estimates that if Donald Trump’s threats of tariffs against Canada and Mexico are fully implemented, they could reduce corporate earnings for the S&P 500 by 2.8%.
The declaration of martial law in South Korea served as a stark warning to investors that political uncertainty remains a persistent risk for global markets.
Although the order was lifted by the country’s parliament just six hours later, the shock was enough to rattle South Korea’s stock market.
The iShares MSCI South Korea ETF dropped by as much as 7%, while stocks linked to South Korea also experienced sharp declines before paring their losses. The KOSPI index, which was closed during the declaration and lifting of martial law, fell by approximately 2% on Wednesday, December 4.
Meanwhile, the South Korean won plunged by as much as 3% against the US dollar. While South Korean markets have since stabilised, analysts warn that the president’s actions could have broader implications and may have caused lasting damage to investor confidence.
President Yoon Suk-yeol is now facing no-confidence motions following the martial law debacle. Mark Williams, Chief Economist for Asia at Capital Economics, also issued a warning for investors regarding South Korea.
“A period of political instability lies ahead for South Korea, which will undermine confidence in the economy,” he stated.
Political uncertainty beyond South Korea
It is not just South Korea facing political uncertainty. The collapse of the French government is another event worrying investors.
Last week saw increased currency volatility surrounding the vote of no confidence, with the euro falling against the dollar.
French bonds have also been hit hard. BCA Research noted that the spread between French and German government bonds has soared over the past week to its highest level since the European sovereign debt crisis in 2012.
US tariff threats
Meanwhile, the US is also fuelling geopolitical uncertainty, as the world braces for a new trade war under Donald Trump.
Trump has called for tariffs, not only against America’s economic rivals like China and nations threatening to abandon the dollar but also against allies and close trading partners like Canada and Mexico.
Barclays estimates that if Trump’s threats of tariffs against Canada and Mexico are fully implemented, they could reduce corporate earnings for the S&P 500 by 2.8%, likely affecting stock prices.
Middle East and Ukraine add to instability
According to Business Insider, simmering conflicts in the Middle East and the ongoing war in Ukraine are also shaking markets.
The war in Ukraine will mark its third year in early 2025, and while Trump has promised to broker a deal to end the conflict, hopes for an immediate ceasefire remain slim.
Meanwhile, uncertainty looms over Syria following recent developments and Assad’s departure.
With conflicts and geopolitical tensions escalating, the global economy is bracing for further turbulence.
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Source: Economy Today
