US Dollar Slides on US-China Trade, Tariff, Tax Concerns

The US Dollar (USD) has weakened to multi-week lows amid renewed trade tensions between the US and China, heightened tariff threats, and concerns about the US economy. President Trump announced a doubling of tariffs on steel and aluminum imports to 50%, provoking retaliatory measures from China and raising fears of a prolonged trade conflict that could dampen US growth and elevate inflation. Additionally, a proposed Section 899 'revenge tax' in Trump's tax bill could impose up to a 20% withholding tax on countries employing so-called 'discriminatory' taxes, further unsettling foreign investors and pressuring the dollar. These developments coincide with softer US employment data expectations and ongoing geopolitical tensions, including military escalations and defense spending increases globally. Despite potential rate cuts in the eurozone and Canada, risk aversion has supported assets like gold and silver, while currencies such as the euro, British pound, Japanese yen, and Australian dollar have appreciated against the dollar. Market participants remain cautious, as the full economic impact of trade disputes and fiscal policies unfolds amidst significant data releases and central bank communications this week.