On March 5, the US dollar fell to its lowest level in three months amid fears of a slowdown in economic growth and possible negative effects of new tariffs on the US economy. This outweighed the potential benefits of higher tariffs on goods from Canada, Mexico and China, informs Reuters.
Trade was volatile on March 5 as investors worried about the impact of rising global trade tensions on the global economy.
In his address to Congress, Donald Trump said that additional tariffs, including “reciprocal tariffs” and non-tariff measures, will be imposed on April 2 to address long-standing trade imbalances.
The dollar initially rose during Trump’s speech, but later began to decline and hit 105.46 against a basket of currencies, the lowest since Dec. 6. Investors have started to sell off the dollar as concerns grow about the outlook for the world’s largest economy, which is already showing signs of slowing.
“Rising Inflation Expectations and Tariff Concerns Threaten US Economy’s Soft Landing,” – said Boris Kovacevich, global macroeconomic strategist of the Convera company.
According to him, the situation indicates increasing risks of stagflation in the USA.
“Of course, the rate hike is theoretically positive for the dollar. However, investors are not only evaluating the short-term benefits, but are also concerned about the long-term slowdown in economic growth,” – added Borys Kovacevich.
