SINGAPORE, April 3 (Reuters) – The dollar experienced a broad decline on Thursday following President Donald Trump’s announcement of harsher-than-expected tariffs against U.S. trading partners. This move sent shockwaves through global markets, prompting investors to seek safe havens such as the yen and Swiss franc. The euro strengthened as a result.
The announcement of tariffs caused global stocks to drop, with investors flocking to the safety of bonds and gold. Trump declared a 10% baseline tariff on all imports to the United States, with higher duties targeting some of the country’s largest trading partners. These tariffs are set to take effect on April 9 and are expected to impact approximately 60 countries.
This escalation in the trade war, initiated by Trump upon returning to the White House, has unsettled markets amid growing concerns that a full-blown trade war could lead to a significant global economic slowdown and inflation. Trump has previously imposed tariffs on aluminum, steel, and automobiles, as well as increased duties on all goods from China.
Market analysts suggest that the high tariffs signal a negotiation tactic, keeping markets on edge. The risk-sensitive Australian dollar fell, while the yen and Swiss franc strengthened. Treasury yields dropped as investors braced for slower U.S. growth, and interest rate futures indicated a higher likelihood of rate cuts.
Concerns persist that some U.S. trading partners may retaliate, potentially leading to higher prices. EU chief Ursula von der Leyen described the tariffs as a major blow to the world economy and indicated readiness to respond if talks fail.
The dollar index fell to its lowest since mid-October, down more than 4% this year. While the tariffs may weigh on the U.S. economy, the outcome may not be catastrophic if Trump shows openness to negotiations.
The euro rose nearly 1%, while sterling reached its strongest level in five months. Asian currencies, however, saw declines, with China’s yuan hitting a two-month low.
— new from Reuters