28 Feb 2025

Earlier in the day, the US Dollar experienced an increase in value, driven by new tariff threats issued by US President Donald Trump, which heightened the attractiveness of safe-haven assets.

On Thursday, President Trump announced via his Truth Social account that 25% tariffs on imports from Canada and Mexico would "come into effect on March 4," citing the ongoing influx of drugs into the economy from these neighboring countries. He also indicated the possibility of imposing an "additional 10% levy on China" on the same date, noting that a significant portion of drugs entering the US, particularly fentanyl, is produced and supplied by China. Furthermore, Trump mentioned his intention to implement reciprocal tariffs starting April 2.

Market analysts suggest that Trump's tariff strategy may stimulate growth while also contributing to inflation within the US economy. This potential outcome could lead Federal Reserve officials to sustain a restrictive monetary policy approach.

On Thursday, Patrick Harker, President of the Philadelphia Fed Bank, expressed support for keeping interest rates at their current levels. He stated that he believes this rate is optimal for achieving the 2% inflation target without adversely affecting the labor market and economic growth.