AUD/USD slumps to near 0.6280 on US Dollar’s strong recovery
- AUD/USD tumbles to near 0.6280 as the US Dollar outperforms on Trump’s tariff agenda.
- Trump’s America First policy has prompted global economic risks.
- Soft US CPI and PPI data for February failed to weigh on the US Dollar.
The AUD/USD pair falls sharply to near 0.6280 in North American trading hours on Thursday. The Aussie pair faces a sharp selling pressure as the US Dollar (USD) outperforms amid cautious market mood. Financial market participants have turned to safe-haven bets amid fears that United States (US) President Donald Trump’s “America First” policies will result in a global economic slowdown.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps to near 104.00, after bouncing back from the four-month low of 103.20 posted on Tuesday.
US President Trump reiterates tariff threats from his post on Truth.Social, “The US doesn't have Free Trade. We have "Stupid Trade." The Entire World is ripping us off.”
On Wednesday, Trump also confirmed retaliatory tariffs on Eurozone on their counter-tariffs on 26 billion Euros (EUR) worth of goods against 25% universal import duty by the US on steel and aluminum.
Meanwhile, investors ignore soft US Consumer Price Index (CPI) and Producer Price Index (PPI) data for February amid the storm of Trump’s tariff agenda. The US headline and core PPI rose at a slower-than-expected pace of 3.2% and 3.4%, respectively, in 12 months to February. Month-on-month headline PPI remained flat while the core figure deflated by 0.1%. Soft US inflation data boosts Federal Reserve (Fed) dovish bets.
On the Aussie front, dismal market sentiment has dampened the Australian Dollar’s (AUD) appeal. The outlook of the Aussie Dollar is also uncertain as the US has imposed 20% tariffs on China. The AUD acts as a mirror of Chinese economic growth, given Australia’s strong reliance on exports to China.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
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