Dollar Strengthens, Stocks Slip as Trump Signals New Trade Tariffs

Wall Street futures slipped and the dollar strengthened on Monday after President Donald Trump reaffirmed plans for 25% tariffs on steel and aluminium, fueling concerns over trade tensions and inflation.

Speaking aboard Air Force One, Trump confirmed that tariffs on all steel and aluminium imports would be announced on Monday, with additional trade measures following on Tuesday or Wednesday. The comments heightened concerns over a potential trade war, especially after German Chancellor Olaf Scholz warned that the European Union would respond "within an hour" if U.S. tariffs targeted European goods.

China is also set to enforce retaliatory tariffs on U.S. exports, with no breakthrough in negotiations between Beijing and Washington. Analysts predict that currencies of targeted nations will weaken against the dollar, allowing them to offset the impact of new tariffs and remain competitive in trade.

Markets are also factoring in the inflationary risks of new tariffs, which could limit the Federal Reserve’s ability to cut interest rates. Investors had already lowered their expectations for Fed rate cuts this year, following strong U.S. employment data.

Dollar Gains as Yields Rise

The dollar index rose 0.3% to 108.38, with the euro slipping to $1.0295 and the Australian dollar falling 0.5% to $0.6245. The yen remained steady at 151.32, as speculation grows over a potential Bank of Japan rate hike in the coming months.

Stock market futures turned negative, with S&P 500 futures slipping 0.2%, Nasdaq futures down 0.3%, and Nikkei futures falling to 38,415 from Friday’s close of 38,787.

Tariff Impact on Corporate Earnings

Concerns over trade policy uncertainty weighed on investor sentiment. Analysts at Goldman Sachs warned that the effective U.S. tariff rate could rise by five percentage points, reducing earnings per share by 1% to 2% in 2025.

Gold Prices Hold Near Record Highs

Despite a stronger dollar and rising bond yields, gold prices remained firm at $2,860 per ounce, after hitting a record $2,886. Reports suggest increased demand for physical gold shipments to the U.S. amid speculation that Trump could impose tariffs on the metal.

As markets brace for new trade measures, investors remain focused on inflation risks, Fed policy moves, and the impact of escalating tariff disputes on global trade flows.

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