The dollar index fell for a second consecutive session, reaching 106.1, its lowest level in about three months, as investors grew increasingly concerned over the escalating trade war and its potential impact on the US economy.
Dollar falls for second day as tariffs weigh
New US tariffs on Canada, Mexico, and China took effect, triggering swift retaliation from Canada and China, including counter-tariffs on US goods such as agricultural products, automobiles, and industrial machinery. The intensifying trade dispute has heightened fears of supply chain disruptions and rising costs for American businesses and consumers.
Adding to the uncertainty, President Donald Trump announced that the US would impose tariffs on “external” agricultural products starting April 2nd, a move widely seen as an effort to protect domestic farmers amid growing backlash. Traders are now closely watching Trump's address to Congress today for any clarification on trade policy and potential future tariff measures, which could further influence market sentiment.
New trade policy already affects US economy
Meanwhile, early signs suggest that the new trade policy is already affecting the US economy. The latest ISM Manufacturing data showed a sharper-than-expected slowdown in the sector, with prices, production, and employment all coming under pressure due to rising input costs and weaker demand. Export orders declined for a third consecutive month, reflecting the impact of retaliatory tariffs on American goods.
The dollar weakened across the board, erasing early gains against the Canadian dollar and slipping against the euro and yen as traders speculated that prolonged trade tensions could force the Federal Reserve to reconsider its stance on interest rates. Bond yields also edged lower, signaling increased investor caution and a shift toward safer assets amid growing economic uncertainty.
