Dollar Surges on Trade Tariff Concerns Stoked by Trump and Treasury Secretary
The US dollar strengthened significantly against its major counterparts on Tuesday following comments from President Donald Trump and Treasury Secretary Scott Bessent that escalated concerns over widespread trade tariffs.
Bloomberg Dollar Spot Index Rises
The Bloomberg Dollar Spot Index jumped 0.5% after Trump indicated he was considering imposing tariffs on a wide range of products, including steel, copper, and semiconductor chips. The euro and yen declined by 0.7% and nearly 1%, respectively.
Trump Suggests Higher Tariffs on Automobiles
Trump also hinted that he could impose tariffs specifically on automobiles from Canada and Mexico. He had previously threatened to levy 25% across-the-board tariffs on those countries starting February 1.
Treasury Secretary Supports Gradual Tariffs
Treasury Secretary Scott Bessent reportedly supports a gradual implementation of universal tariffs starting at 2.5%. However, Trump later stated that he wanted tariffs "much bigger" than 2.5%.
Impact on US Treasuries and Global Markets
The news drove US Treasuries lower, reversing the previous day's rally. The 10-year yield rose to 4.56%. The dollar's rally coincided with a volatile day in global markets triggered by concerns about the sustainability of US economic exceptionalism in the wake of setbacks in the AI sector.
Speculators Reduce Bullish Positions
Speculators have been reducing their bullish dollar positions, raising concerns about potential downside risks. However, the dollar remains strong due to expectations of inflation pressures and elevated interest rates resulting from Trump's policies.