The US dollar hit a new two-week low amid uncertainty over President Donald Trump’s tariff plans, Reuters reported.
Trump said late on Tuesday night that his administration was discussing imposing a 10% tariff on goods imported from China starting on 1 February. Earlier in the day, he announced that Mexico and Canada could face duties of around 25%.
However, despite the threats, the lack of concrete plans caused the dollar to fall by 1.2% against other currencies. It recovered later on Tuesday, as US officials said any new taxes would be imposed moderately.
Still, Deutsche Bank’s Jim Reid said Trump’s statements “leave plenty of near-term uncertainty.”
Tariffs have again grabbed the headlines overnight as Trump commented in the evening that his threat of a new 10% tariff on China was still on the table… Trump’s comments leave plenty of near-term uncertainty even though the trade investigations from his day 1 executive orders will take some time to play out.
Analysts note that Trump’s policies on immigration, taxes and tariffs are likely to boost growth, but will lead to inflation, albeit limited. Meanwhile, traders expect the Federal Reserve to cut the interest rate by a quarter point by July.
Alvin Tan, head of Asia FX strategy at RBC Capital Markets, said the tariff on Chinese imports was far below “the 60% rate” that Trump mentioned during his campaign. Tan also suggested that the US leader “appears to be positioning for trade negotiations.”
Altogether these suggest that the U.S. dollar could drop further.