The U.S. dollar declined on Monday as investors reacted to growing uncertainty over Donald Trump’s trade policies, raising concerns about potential inflation, economic slowdown, and instability in global trade.
🔹 Dollar Index Falls Under Trade Pressure
The U.S. Dollar Index, which measures the dollar against six major currencies, dropped to 99.15, marking a 0.11% decline over the past 24 hours. The greenback remains under pressure as confidence in the U.S. economic outlook continues to waver.
On Friday, Trump announced plans to double tariffs on steel and aluminum imports to 50% starting Wednesday, triggering a cautious response across global markets.
Dollar Slips Against Major Currencies
📉 USD fell 0.3% to 143.57 JPY
📈 Euro rose 0.2% to 1.1372 USD
📈 Pound gained 0.3% to 1.3489 USD
📈 Australian dollar climbed 0.3% to 0.6454 USD
📉 USD dropped 0.2% to 1.3727 CAD
Meanwhile, futures contracts on the S&P 500 dropped 0.4%, and Nasdaq futures lost 0.5%, despite May’s market rally that had been driven by hopes of a more moderate trade stance.
“The dollar is trading near the lower end of its post-2022 range. Despite rate differentials, sentiment remains negative, and the greenback is vulnerable to further bad news in trade or fiscal policy,” said Jonas Goltermann, Deputy Chief Economist at Capital Economics.
Tariff Confusion: Courts, Politics, and Uncertainty
The situation became even more tangled last week when a U.S. trade court blocked Trump’s proposed tariffs, citing abuse of executive authority. However, an appeals court reversed the decision just a day later, reinstating the tariffs and deepening the confusion.
The Trump administration stated that if it loses in court, it has alternative legal pathways to reintroduce the tariffs.
JPMorgan: Trump Still Has Tools to Raise Tariffs
Bruce Kasman, Chief Economist at JPMorgan, noted that the administration can still maintain a minimum tariff level of 10% and potentially increase sector-specific tariffs, especially on goods from Southeast Asia.
He also warned that the likelihood of tariff escalation in U.S.–EU trade remains high, especially in response to transshipment practices and regulatory loopholes.
Fiscal Tensions and Tax Reform Threaten the Dollar
At the same time, the dollar is under pressure from mounting fiscal concerns, as Trump’s proposed tax cuts and spending plans could add $3.8 trillion to the U.S. federal debt—currently at $36.2 trillion—over the next decade.
The U.S. Senate is reviewing key provisions of the plan, including the controversial Section 899, which would give the government greater powers to tax foreign companies. According to analysts at Barclays, this could deter foreign investors and reduce capital inflows into U.S. markets.
“Actively reducing returns on U.S. investments for foreigners would discourage capital inflows and put downward pressure on the dollar,” the bank noted.
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