Traders continued to monitor the potential impact of new US tariffs this week, as President Donald Trump renewed threats to impose a 30% tariff on imports from Mexico and the European Union starting August 1. The announcement follows several weeks of trade negotiations that have yet to produce a comprehensive deal with key partners.
While global markets have become more accustomed to tariff-related headlines, the possibility of new duties remains an important factor for investors assessing risks to trade flows, inflation, and economic growth.
“It’s something that’s happened before and the shock value is gone,” said Joseph Trevisani, senior analyst at FX Street. “The negative predictions haven’t really materialized, so markets are not giving too much weight to tariff threats for now.”
Despite this sentiment, European officials on Monday stressed they remain open to negotiations but may prepare countermeasures if no resolution is reached before the US deadline to avoid additional trade restrictions.
Economists are also watching for the potential inflationary effect of tariffs. Federal Reserve Chair Jerome Powell has previously noted that higher import duties could lift consumer prices in the short term, possibly influencing the central bank’s monetary policy outlook.
Traders are expected to pay close attention to June’s consumer price index report, due Tuesday, to see if inflation pressures are building alongside tariff risks. Forecasts suggest headline inflation may increase to 2.7% annually, up from 2.4% last month, with core inflation seen rising to 3.0%.
The market is also pricing in the chance that interest rate cuts could still happen later this year, although fresh tariffs could delay such moves if price pressures persist.
Currency markets reflected a cautious tone. The euro slipped 0.16% to $1.167 on Monday, reaching a three-week low, while the dollar index gained 0.19% to 98.07. The US dollar also strengthened against the Japanese yen, rising to 147.72, the highest level since late June.
Meanwhile, the Mexican peso weakened by 0.39% versus the dollar amid concerns about the proposed tariffs’ potential impact on Mexico’s export-dependent economy. The British pound also fell 0.52% to $1.3429.
Bank of England Governor Andrew Bailey commented separately that uncertainty around trade policies and tariffs remains a factor that could weigh on global growth.
Beyond traditional markets, Bitcoin surged past $120,000 for the first time on Monday, with some investors viewing digital assets as a potential hedge in times of policy and trade uncertainty.
As the August deadline approaches, businesses and policymakers on both sides of the Atlantic are watching for signs of progress or further escalation on tariffs that could affect cross-border trade and supply chains.
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