The powerful dollar surged dramatically on Friday as President Trump unveiled sweeping new Trump tariffs that sent shockwaves through global markets. The U.S. currency index climbed 0.2% on the day and is on course for a weekly gain of nearly 0.8%, underpinned by the announcement of blanket 15–20% tariffs on major trading partners and a particularly steep 35% tariff targeting Canada, effective August 1.
Loonie Falls Amid Canada Tariff Threat
Canada was hit hardest. The loonie falls over 0.5% in response to the looming 35% levy. It traded around 1.37 CAD per USD with intraday ranges between 1.3664 and 1.3708 showing clear strain from the tariff impact. Though U.S. officials later clarified that goods fully compliant with USMCA might receive exemptions, uncertainty still weighed heavily.
Broader Currency Impact
The powerful dollar also gained ground against other major currencies:
- Euro dropped ~0.25% to $1.1671, with a weekly slide nearing 1%.
- Australian dollar fell by ~0.31% amid general risk-off sentiment .
- Yen slipped further, hitting a five-month low, weakened by fading hopes of a U.S.-Japan trade agreement.
Emerging markets such as Brazil and India felt currency pressures too. Brazil faces potential 50% tariffs, prompting President Lula to demand diplomatic engagement to prevent retaliation. Meanwhile, the rupee is poised to open weaker within the 85.70–85.74 range per USD, reflecting spillover from the dominant powerful dollar dynamic.
Safe Havens & Commodities React
In commodity markets, gold edged higher though only modestly due to the dollar’s strength. Gold climbed ~0.2%, capped by the robust greenback, while silver, platinum, and palladium showed mixed results .
Trade-sensitive assets faced pressure:
- Stock futures in the U.S. and Europe softened after Trump’s announcements; S&P futures dipped ~0.4%.
- Oil prices rebounded slightly following earlier losses.
Investor attention now turns to next week’s U.S. corporate earnings starting with JPMorgan Chase to assess how tariffs will ripple through profits.
Trump Tariff Landscape
President Trump outlined the following measures:
- Blanket tariffs of 15–20% on most U.S. trade partners.
- A 35% tariff on Canadian imports, set to begin August 1.
- 50% tariff on copper, including semi-finished products critical to industries like power grids and defense.
- Additional potential duties targeting the EU, Japan, South Korea, and Brazil .
These moves are part of Trump’s broader economic policy, which has already lifted overall U.S. tariff levels from around 2.5% to over 27%, prompting retaliatory actions especially from Canada and Mexico.
Market Implications
- Currency Volatility
The powerful dollar has been a consistent flight to safety destination. The loonie’s descent puts added pressure on Canadian exporters and could ripple through reserves and bond markets. - Cross-Market Ripples
Market nerves impacted commodities like gold and copper, and banks, increased trading volumes amid volatility could lift banking revenue with Q2 forecasts hinting at 7–10% gains from trading activity. - Geopolitical Tensions
Targets like Brazil, Japan, Canada, EU signal potential for diplomatic friction. Brazil’s Lula urgently seeks dialogue, while Canada contends with ongoing USMCA exemption negotiations . - Policy Delays & Legal Pushback
The U.S. Court of International Trade previously vacated elements of Trump’s “Liberation Day” tariffs, though appeals have allowed them to remain. Further legal or policy actions could reshape the landscape.
Outlook Ahead
- Corporate earnings reports next week will be pivotal, key players like JPMorgan and Delta Airlines could offer insights on tariff costs and profitability.
- Economic indicators, especially inflation and jobs data, will help determine whether the Fed shifts monetary policy in response.
- Diplomatic negotiations may ease the impact if exemptions or trade deals are finalized especially concerning Canada, the EU, and Japan.
The powerful dollar is asserting dominance in currency markets, while the loonie falls under direct pressure from the 35% Canada tariff. Beyond forex, these Trump tariffs are sending ripples through commodities, equity futures, and even global diplomacy. With earnings and macroeconomic data on the horizon, investors will scrutinize how deep tonight’s tariff shockwaves run.
