EUR/USD jumps to two-week highs on Trump tariff announcements
- EUR/USD rallied to test above 1.0900 after Trump tariffs come in near expectations.
- Ongoing market reactions are expected as investors continue to digest the news.
- The US is set to impose a 10% across-the-board tariff on all goods imported into the US.
EUR/USD lurched higher late Wednesday, tapping its highest bids in ten consecutive trading days after market sentiment reacted positively to better-than-expected tariff levels from the Trump administration. US President Donald Trump vowed for a 10% across-the-board tariff on all imports into the US, giving investors what they initially thought they wanted.
Further details on tariffs show a significant ramp-up in reciprocal tariffs, as well as an additional 25% tariff on all imported automobiles. The Trump administration has also opted for a partial-reciprocal tariff rate on a per-country basis, adding significant complexity to US trade logistics.
More to come…
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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