US tariffs: Policy paradox weighs on Dollar – NBC

FXStreet Insights Team FXStreet

National Bank of Canada's (NBC) Jocelyn Paquet analyzes recent US tariff developments after the Supreme Court overturned tariffs imposed under IEEPA, temporarily cutting the average rate before the Trump administration reinstated higher duties via a universal 15% tariff. The report highlights implications for US fiscal sustainability, net interest payments and bond market sentiment, underscoring tensions between economic benefits of lower tariffs and fiscal needs.

Tariff swings and US fiscal concerns

"Last Friday, the U.S. Supreme Court overturned the tariffs that the Trump administration had imposed last year under the International Emergency Economic Powers Act (IEEPA). This decision temporarily lowered the average tariff on imported goods from 13.6% to 6.4%. Had the reduction been permanent, it would have significantly lowered the tariff burden on businesses and potentially eased price pressures in the goods sector, a growing concern lately."

"However, it would also have contributed to a dramatic decrease in customs duty revenues for the federal government, from approximately $335 billion per year to $155 billion per year. We doubt this would have gone down well with bond traders, who already have good reasons to question the U.S. government's fiscal trajectory."

"As much to reassure the bond market as to stimulate domestic production, the Trump administration responded to the Supreme Court’s ruling by imposing a universal 15% tariff under Section 122 of the Trade Act of 1974. This brought the effective tariff rate back up to 12.0% and increased tariff revenues to around $290 billion per year, with the remaining shortfall potentially to be addressed by a new round of sectoral tariffs."

"While the fiscal endpoint might in the end not be so different from what prevailed last week, the events of the last few days – notably the rush to reassure markets that tariff revenues would not decrease – highlights the policy paradox in which the administration currently finds itself, where any reduction in tariffs is likely to be viewed positively from an economic standpoint but negatively from a fiscal one."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD regains mild traction, falters near 0.7150

AUD/USD gathers some steam and manages to flirt with the 0.7150 level on Thursday. However, the pair has retraced some of Wednesday’s significant pullback due to renewed selling pressure on the Greenback and a slight improvement in risk sentiment following hopes of a deal in the Middle East. Wrapping up the Australian docket, the RBA’s Hauser will speak early on Friday.

USD/JPY trades below 160.00 intervention threshold; bullish bias intact

The USD/JPY pair attracts some sellers during the Asian session amid fears that authorities will step in again to prop up the Japanese Yen. Furthermore, the Israel-Lebanon truce prompts some profit-taking around the US Dollar and exerts downward pressure on the currency pair.

Gold puts its 200-day SMA to the test near $4,420

Gold keeps the bullish stance in place in the latter part of Thursday’s session, although a convincing break above the key $4,500 mark per troy ounce still remains elusive. The precious metal’s advance comes amid the resurgence of some selling interest around the Greenback, improving risk sentiment, and declining US Treasury yields across the board.

XRP plummets as ETF outflows, geopolitical tensions reinforce bearish outlook

Ripple (XRP) edges lower, trading around $1.15 at the time of writing on Thursday, its lowest price since February 6. The cross-border money remittance token is extending the sell-off for the fifth consecutive day, reflecting persistent headwinds from ongoing geopolitical tensions and investor uncertainty.

Nonfarm payrolls: Testing the limits of Fed policy patience

The upcoming nonfarm payrolls report for May will provide the final update on the US labor market before Kevin Warsh attends his first policy meeting as the new Fed Chair later this month.

Recession on paper: What really moves the Canadian Loonie now?

Statistics Canada handed the headline writers a gift and the analysts a headache. Real GDP shrank 0.1% on an annualized basis in the first quarter, and with the fourth quarter of 2025 revised down to a 1.0% contraction, that is two negative quarters in a row, the textbook definition of a technical recession and Canada's first since the pandemic.