Wall Street Futures Tumble, Dollar Soars Amid Escalating Trade Tensions
US stock futures declined, and the US dollar strengthened broadly on Monday after President Donald Trump reiterated threats of imminent tariffs on steel and aluminum imports.
Trump announced plans to impose 25% tariffs on all such imports on Monday and unveil additional reciprocal tariffs this week. The move has sparked concerns of an escalating trade war.
The European Union and China have pledged swift retaliatory measures, highlighting the potential for economic damage. Analysts predict currencies from targeted countries may weaken against the dollar to offset the impact on exports.
Tariffs could also fuel inflation in the US, potentially limiting the Federal Reserve's ability to cut interest rates. Markets had already reduced expectations for rate cuts to just 36 basis points, down from 42 basis points, following a strong employment report on Friday.
Fed Chair Jerome Powell will testify before Congress this week, where the impact of tariffs on monetary policy is expected to be a key topic.
Economic data this week, including January's consumer price index, may indicate early inflationary pressures from firms raising prices in anticipation of tariffs.
Investors responded by sending the US dollar index up 0.3% to 108.38. The euro fell 0.3% to $1.0295, while the Australian dollar declined 0.5% to $0.6245.
Gold prices continue to hit record highs, reaching $2,886 an ounce as investors seek safe haven amid uncertainties and rumors of potential tariffs on the metal.