The USD has rallied sharply this morning after the Trump administration unveiled details of its tariff proposals over the weekend.
The import duties announced are set at the below levels for the following countries and will take effect tomorrow:
Canada: 25% on all imports (10% on energy) Mexico: 25% on all imports China: 10% on all imports
Trump has also said that tariffs on the EU ‘will definitely happen’ and market commentators are expecting to hear more news on this relatively soon. When asked about the UK, he said the UK was ‘out of line’, but implied that a deal can be struck to avoid tariffs.
As a result, the Euro is among the worst performers in the G10 this morning and the EUR/USD is down nearly 2% from Friday. Sterling losses have so far been relatively contained due to the UK’s lack of reliance on external demand and hopes of US-UK trade deal. However, the Dollar’s strength has still pulled the GBP/USD down 1.5 cents and close to a 2-week low. The GBP/EUR has risen nearly 0.75% from Friday and trades at the highest levels for 3.5 weeks.
We have some important market events this week, including BoE rate decision (Thurs) and US non-farm payroll data (Fri). However, it’s likely news flows on Trump’s tariff agenda will dominate market movements this week. Even after the recent sell off, most currencies still trade at levels that imply markets are expecting draconian tariff levels to be short lived.
