Following Trump’s ad-hoc tariff announcement on Sunday, Monday saw a market in turmoil. After a day of ups and downs, the dollar ended ahead, 0.1% up on the euro and more than 0.45% up on the pound.
On Sunday evening, Trump announced 25% import tariffs on all US steel and aluminium imports. While Canada, China and Mexico are three of the largest exporters to the US, such a wide-ranging tariff would impact countries worldwide.
While the day began with the market reeling from the shock news, with the dollar gaining 0.3% on the pound and euro, with no concrete details on when the tariffs would come into force, the market quickly settled. By the end of day, the dollar was only 0.1% up on the European currencies. However, when Trump revealed in the evening a March start date with no exceptions for the tariffs the market surged behind the dollar.
The euro fared much better than the pound by the day’s end, perhaps because the European Union has proven to be able to battle US steel tariffs in the past. When Trump applied a tariff to steel imports in his first term, the EU hit back with levies on US exports, such as bourbon and Harley Davidson motorcycles.
The market’s confidence in the euro may also reflect the difference in response. German Chancellor Olaf Scholz told reporters that any tariffs would earn counter tariffs, while Downing Street declined to comment until it had seen details of the proposed tariffs, refusing to speculate on wielding counter tariffs.
Today will see US Federal Reserve chair Jerome Powell questioned over the bank’s decision to maintain interest rates despite positive economic markers, such as high job figures and decreased unemployment. Meanwhile, with the tariffs now detailed, the market will remain volatile as countries announce their responses and retaliations to Trump’s latest salvo in the trade war.
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