The US Dollar Index (DXY) climbed to around 97.80 during early Asian trading on Friday, gaining momentum after former President Donald Trump announced sweeping new tariffs targeting key trade partners.
On Thursday, Trump revealed a 35% tariff on Canadian imports effective August 1, warning that these levies are separate from sector-specific duties and could increase if Canada retaliates. The announcement follows over 20 letters sent this week to various trading partners, outlining expected tariff rates unless new trade deals are reached. Trump indicated that the European Union would receive its notice “today or tomorrow.”
“We’re going to make all remaining countries pay — whether it’s 20% or 15%, we’ll figure that out now,” Trump said.
Earlier this week, he also introduced tariffs on copper, semiconductors, and pharmaceuticals, including a steep 50% rate on Brazilian imports, also starting in August.
These aggressive tariff measures have reignited inflation concerns, which could prompt the Federal Reserve to delay rate cuts until next year. Markets are currently pricing in a total of 50 basis points (bps) of Fed rate reductions by year-end, likely beginning in October.
Meanwhile, labor market data supported the USD’s strength. Initial jobless claims for the week ending July 5 fell to 227,000, beating the forecast of 235,000 and down from the previous week’s 233,000. The data suggests continued labor market resilience, reducing urgency for further Fed rate easing and providing additional support to the Greenback.
