Markets react 'calmly' to Trump 15% tariff hike; USD outlook 'unclear' in near term

Matthew Ryan, CFA Ebury

“Markets have reacted in a relatively calm fashion to the unveiling of Trump’s 15% global tariffs. For one, his pivot towards alternate legal methods was widely anticipated, while the fact that the latest levies are only a temporary stop-gap measure means that they will no doubt soon be replaced by other mechanisms.

“We also contend that this doesn't change the outlook for the US economy all that much, given that the 15% tariff rate is more-or-less in line with the average effective tariff rate prior to the Supreme Court decision.

“The outlook for the dollar is unclear in the near-term. We think that the greenback could sell-off should markets fret that possible tariff refunds could pose a risk to US fiscal sustainability.

“On the other hand, the acute uncertainty as to where global trade goes from here could boost the dollar’s appeal as one of the world’s chief safe-haven currencies.”

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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