Dollar Strengthens After Trump Announces Tariffs on Japan, South Korea
The U.S. dollar surged against major global currencies on Monday after President Donald Trump unveiled new tariffs set to take effect on August 1, targeting several countries including Japan and South Korea.
Trump shared letters on his social media platform addressed to various world leaders, stating that 25% tariffs would be imposed on exports from Japan and South Korea. Similar letters were also sent to the leaders of Malaysia, Kazakhstan, Myanmar, South Africa, and Laos, reaffirming tariff rates broadly aligned with those outlined in April.
The greenback made its biggest gains against the Japanese yen, rising 1.09% to 146.130. It also advanced 0.38% to 0.798 against the Swiss franc.
“Some of these currencies were already under pressure due to specific national issues,” said Brad Bechtel, global head of FX at Jefferies. “But today’s news out of the U.S. regarding Trump’s tariff plans is clearly hitting non-dollar currencies.”
The euro dropped 0.57% to $1.172, despite having risen over 13% since the start of the year. Market participants are increasingly worried that the EU may not reach a trade agreement with the U.S. before the looming deadline, as negotiations with Washington have progressed slowly.
Most of America’s trading partners are bracing for higher tariffs once the 90-day pause on Trump’s “Liberation Day” reciprocal tariff regime ends this Wednesday.
Trump has also threatened to impose an additional 10% duty on countries he says are aligning with “anti-American” policies of the BRICS coalition of emerging economies.
The U.S. dollar index—which tracks the greenback against six major global currencies—climbed 0.517% to 97.467, hitting a one-week high. Last week’s gains were driven in part by unexpectedly strong labor market data, which reduced expectations for near-term interest rate cuts by the Federal Reserve.
Despite recent gains, the dollar index remains near its lowest level in three and a half years, having declined 10% year-to-date, as investors have grown skeptical about the U.S. dollar’s safe-haven appeal and reevaluated earlier assumptions that the U.S. would be insulated from global economic headwinds.
The British pound slipped 0.26% to $1.362, though it remains close to its strongest level since October 2021.
Risk-sensitive currencies such as the Australian and New Zealand dollars also declined, falling 0.79% and 0.74% respectively, ahead of central bank meetings in both countries this week. The Reserve Bank of Australia is expected to cut its cash rate by 25 basis points on Tuesday, while the Reserve Bank of New Zealand is forecast to keep rates unchanged on Wednesday.
While U.S. political and trade uncertainty continues to weigh on the dollar, it’s no longer having the same impact it did earlier in the year, according to Paul Mackel, global head of FX research at HSBC. “That said, we still believe this relationship matters,” he added.
