President Donald Trump’s new tariff measures have boosted the US dollar while causing a drop in the Canadian dollar and other risk-sensitive currencies. This report examines the impact of these trade policies on global markets.
US President Donald Trump’s announcement of increased tariffs on imports from Canada, the European Union, and Brazil has triggered significant volatility in global currency markets. The US dollar strengthened against most currencies, while the Canadian dollar and other risk-sensitive currencies experienced notable declines.
US Dollar Gains Momentum Amid New Tariff Measures
On Friday, the US dollar recorded a substantial rise in value following President Trump’s announcement of new trade tariffs. Trump revealed plans to impose broad tariffs ranging between 15% and 20% on imports from most trade partners, raising concerns about the future of global trade.
During early Asian trading hours, currency markets were relatively stable with most currencies trading within narrow ranges. However, after Trump’s statements were released, the dollar gained ground swiftly, reinforcing its status as a safe-haven amid growing market uncertainty.
Canadian Dollar Drops Sharply on 35% Tariffs
One of the most pronounced effects of the new tariffs was a sharp decline in the Canadian dollar. The loonie fell over 0.5% against the US dollar, reaching 1.3726. This drop followed the announcement of a 35% tariff on Canadian imports, set to take effect from August 1.
Market analysts suggest this unexpected move introduces heightened risks for global markets and has made investors cautious about the trajectory of trade negotiations and the potential for further tariff hikes. Tony Sycamore, a market analyst at IG, emphasized that the market was unprepared for this development, which could lead to declines in risk assets.
EU Outlook and Euro’s Decline
Meanwhile, Trump indicated that the European Union might receive a letter detailing new tariff rates by Friday, prompting a negative market reaction. The euro fell 0.25% to $1.1671 and is forecasted to lose nearly 1% of its value for the week.
These developments cast doubt on the progress of trade talks between Washington and Brussels, intensifying uncertainties surrounding the future trade relationship between the two parties.
Impact on Other Global Currencies and Market Sentiment
Risk-sensitive currencies such as the Australian dollar also came under pressure, dropping 0.31% to $0.6568. In Asian markets, the Japanese yen fell 0.13% to 146.44 per dollar, pressured by the 25% tariffs imposed earlier in the week. The yen is on track to record its steepest weekly loss of over 1% in several months.
The New Zealand dollar declined by 0.32% to $0.6013, while the British pound slipped 0.22% to $1.3551. The pound is expected to lose more than 0.6% in value over the week.
Trade Tensions with Brazil and the Real’s Response
Brazil has also become a focal point amid escalating trade tensions. President Luiz Inacio Lula da Silva stated his intent to seek a diplomatic solution to the US threat of a 50% tariff on Brazilian imports but warned of a reciprocal response should the tariffs come into effect on August 1.
The Brazilian real remained largely unchanged against the dollar at 5.5321 but experienced a weekly decline of around 2%, marking its largest drop in nearly five months.
Outlook and Continuing Market Concerns
Although the market’s reaction to Trump’s series of tariff announcements has been more muted compared to the sharp selloff seen in April, investors remain apprehensive about the outlook for global trade and the implications of the August 1 deadline.
This ongoing uncertainty has provided support for the US dollar, which rose 0.2% against a basket of currencies and is on course to register a weekly gain of 0.8%, one of its best performances in recent weeks.
