The dollar just hit its lowest point in 2025, down 10% against major currencies, while Wall Street stocks cling to record highs. Why? Investors are experiencing anxiety due to President Trump's latest tariff threats, a shaky U.S.-China trade truce, and mixed economic signals.
With Trump promising trade deal letters to dozens of countries in weeks, markets are bracing for chaos or a breakthrough. Is this high-stakes gamble about to reshape the global economy?
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Tariff Threats Unnerve Investors
Trump’s announcement that the U.S. will send trade deal terms to multiple nations, with a take-it-or-leave-it vibe, has markets reeling. Following a brief moment of relief due to a U.S.-China truce that slashed tariffs to 30% on Chinese goods, the mood soured as Trump hinted at new levies.
The dollar slid to its lowest since April 2022, and the euro hit $1.16, its highest since October 2021. Investors, spooked by Trump’s erratic policy shifts, are dumping U.S. assets, fearing inflation spikes and growth slowdowns.
Did you know?
In 1987, the U.S. stock market crashed on “Black Monday,” with the Dow Jones plummeting 22.6% in a single day, triggered by a mix of trade fears and program trading, echoing today’s tariff-driven volatility.
Safe-Havens Surge Amid Uncertainty
Trump's tariff maneuvers are causing safe-haven assets to become increasingly popular. Gold climbed 1% to $3,384 an ounce, while the Swiss franc and Japanese yen gained 0.9% and 0.5% against the dollar, respectively.
Middle East tensions, exacerbated by Iran's defiance of uranium enrichment, are driving investors toward safety. U.S. Treasuries rallied, with 10-year yields dipping 3.1 basis points to 4.383%, signaling a flight from riskier bets.
Fed Faces a Tariff-Fueled Dilemma
Soft U.S. CPI and PPI data for May, showing contained inflation due to lower gasoline and airfare costs, gives the Federal Reserve breathing room, but not for long. Economists warn Trump’s tariffs could reignite inflation, delaying expected rate cuts until September.
Markets are pricing in just 44 basis points of easing by December as the Fed's next meeting approaches. Will tariffs force the Fed to rethink its strategy?
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