The U.S. dollar remained firm on Tuesday as President Donald Trump’s latest tariff threats were seen as a negotiation tactic rather than a definitive policy shift. While planned tariffs on Mexico and Canada were suspended, a new 10% levy on Chinese imports took effect, prompting a swift but measured

The U.S. dollar held steady as fresh tariffs on Chinese imports took effect at 12:01 a.m. ET (0501 GMT) Tuesday. Markets interpreted Trump’s actions as a bargaining strategy, though analysts warned of continued volatility.

The U.S. dollar index remained at 108.5, while the Canadian dollar and Mexican peso weakened after Monday’s rebound. The euro also slipped, with Washington threatening the EU with potential trade levies, raising concerns over inflation and interest rates.

Beijing retaliated with its own tariffs but kept the response moderate, suggesting China is leaving room for further negotiations. “China is cautious not to escalate tensions too quickly,” said Lee Hardman, senior currency analyst at MUFG.

The yuan edged down 0.15% to 7.2914 per dollar in offshore trading. The Australian dollar, closely tied to China’s economy, fell 0.35% to $0.6206.

The euro declined 0.15% to $1.033, with analysts predicting further losses if trade tensions intensify. Deutsche Bank’s George Saravelos noted that a prolonged dispute could push the euro toward parity with the dollar.

Elsewhere, the Canadian dollar slipped 0.15% to C$1.4428, while the Mexican peso fell 0.23% to 20.380. The Japanese yen, often a safe-haven currency, lost 0.38% against the dollar, trading at 155.31 per dollar.

With no resolution in sight, analysts expect ongoing fluctuations in currency markets as trade disputes continue to shape economic outlooks.

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