Marine One is pictured ahead of the inauguration ceremony where Donald Trump was sworn in as the 47th U.S. President in the Capitol Rotunda in Washington, DC, on Jan. 20, 2025.ANDREW CABALLERO-REYNOLDS/AFP/Getty Images
The dollar tumbled broadly on Monday after an official for incoming U.S. administration said President-elect Donald Trump would not impose new trade tariffs on his first day in office, alleviating some fears of an immediate blitz.
Trump, who takes office later in the day, has previously pledged tariffs of 10% on global imports, 60% on Chinese goods and a 25% import surcharge on Canadian and Mexican products, duties that may upend trade flows, raise costs and draw retaliation.
Canada to dodge Trump tariffs on day one: reports
The Canadian dollar, the Mexican peso and the Chinese yuan all strengthened by 1-1.5%, while the euro rose 1.5%, set for its largest one-day rally against the dollar in well over a year.
Canadian and European stock markets rallied.
Here’s what observers are saying:
Paul Ashworth, chief North America economist, Capital Economics
“On trade, the WSJ reported that the Trump administration doesn’t intend to levy new tariffs on trade just yet. But in his address Trump warned that “we will tax and tariff foreign countries to enrich our citizens” and pledged to create an External Revenue Service to collect those duties. Trump will sign an executive order that calls for an assessment of whether China lived up to its commitments under the Phase One trade deal. The memo also targets Canada and Mexico, instructing federal agencies to assess the impact of USMCA. Our working assumption is still that Trump will levy a 10% universal tariff with a 60% tariff on imports from China sometime in the second quarter of this year. Some of Trump’s closest advisers would clearly like to limit the scope and size of those tariffs, but we suspect that Trump himself remains steadfast in his protectionist intentions and he will eventually win the internal debate.”
Matheus Zani, Head of FX Risk Management at Deaglo:
“Markets are still digesting this development. However, in the coming days, high volatility is expected across the board, as the overall impact on the USD remains uncertain. Market participants are likely to wait for clarity on several key factors:
- Speed of Policy Announcements: How quickly will Trump begin signing executive orders? Will today be limited to ceremonial events, with substantive actions deferred?
- Speed of Implementation: Will any executive orders take effect immediately, or will there be delays to allow for negotiations?
- Global Tariffs: Will proposed tariffs on global trade materialize, or remain a looming threat?
- Canada and Mexico: Will the threatened 25% tariffs on Canadian and Mexican imports take effect on day one?
- China: Will China face immediate tariffs, whether through a broader 10% global tariff policy or targeted measures against Chinese exports?
While today’s developments have weakened the dollar, markets will need more time to fully assess the administration’s policy direction and its long-term implications for the currency.”
Frederik Ducrozet, head of macroeconomic research, Pictet Wealth Management, Geneva:
“The market is very sensitive to this topic (tariffs).”
“In the last two weeks we have seen two conflicting views from the new administration - the hard-liners on tariffs and those who favor a more market-friendly approach.”
“So, this perception that the door is open to negotiations is important. But it doesn’t tell us where we will end and I will be waiting for details on the scope of tariffs, which sectors will be impacted.”
“The fact that he might be choosing a gradual approach is an encouraging sign.”
Nick Rees, head of macro research, Monex Europe, London:
“Markets seem to be taking comfort from a headline suggesting that day-one Trump tariffs are off the table. That said, we think this confidence might be a little misplaced. Broad based day-one tariffs were always unlikely, but more targeted import levies shortly after inauguration day are another question.”
“On this point, we think a note that Trump will direct Federal agencies to evaluate U.S. trading relationships with China and America’s continental neighbors is interesting. The devil will be in the detail, and we are yet to see the memo, but we would not be surprised if markets ultimately unwind much of this latest move as the particulars become clearer in the coming hours and days.”
Kathleen Brooks, research director, XTB:
“The impact will hinge on Trump’s rush to sign executive orders. There have been reports that Trump could sign up to 100 executive orders today, these could include deregulation for the energy and financial sector, including crypto. However, reports this afternoon, suggest that the president won’t implement a package of tariffs today, instead he is planning to sign a memo that will direct Federal agencies to evaluate U.S. trade relationships with China, Mexico and Canada, in particular.”
“It will also direct the agencies to investigate other US trade deficits and unfair trading practices. Conspicuous by their absence are actual tariffs, which suggests that a program of tariffs is still under debate by Trump and his team.”
Boris Kovacevic, global macro strategist at Convera:
“The euro moved strongly higher against the U.S. dollar today ($1.04) and is on track to record its best day of the year so far. The rise follows reports that President Trump will delay imposing new tariffs on his first day in office. This eased market concerns over trade tensions, sparking a risk-on sentiment that benefited the euro.”
With reports from Reuters
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