**US Dollar Index Gathers Strength Above 97.50 as Trump Announces New Tariffs**
*Original author: [Eren Sengezer, FXStreet]*
On Thursday, the US dollar surged in forex markets after President Donald Trump announced new tariffs on Chinese imports, reigniting trade war concerns and driving a pronounced risk-off sentiment. The US Dollar Index (DXY) broke decisively above the 97.50 mark, extending its dominance against a basket of major currencies as investors rushed for the relative safety of the greenback. In this article, we’ll delve into the fundamental events shaping the US dollar’s trajectory, unravel the specific catalysts behind the DXY’s rally, and assess the likely implications for various forex pairs and asset markets.
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### Tariff Announcement Sparks a Fresh Wave of Volatility
In a tweet that sent shockwaves through financial markets, President Trump declared that the United States would impose an additional 10% tariff on $300 billion worth of Chinese goods effective from September 1. This broadens the scope of tariffed Chinese imports essentially to cover all Chinese products entering US borders, beyond the previous rounds targeting $250 billion.
– **Key elements of Trump’s Tariff Announcement:**
– 10% tariff rate on remaining $300 billion of Chinese imports.
– Effective date set for September 1.
– Justification tied to China’s failure to purchase US agricultural goods and curb fentanyl exports, as had been promised.
– Follows a generally positive tone from prior negotiations, compounding the element of surprise.
The unexpected escalation undermined hopes of an imminent trade agreement and set in motion a sharp flight to safety. Equities plunged, treasuries soared, commodity-linked currencies like the AUD and NZD declined, and the Chinese yuan faced downward pressure.
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### The Immediate Reaction in Currency Markets
Forex traders responded swiftly to the new uncertainties. The DXY, which measures the value of the US dollar versus six key peers (EUR, JPY, GBP, CAD, SEK, CHF), leapt above the psychologically significant 97.50 threshold, and briefly tested highs near 98.00.
– **DXY key intraday moves:**
– Opened the day near 97.20, consolidating ahead of the announcement.
– Shot higher within minutes of the tariff news, breaking above 97.50.
– Extended gains toward 98.00 before modest retracement as volatility moderated.
Safe-haven flows benefited not only the dollar but also the Japanese yen and Swiss franc. Conversely, risk-sensitive major currencies and emerging market units saw pronounced declines.
– **Top Gainers:**
– USD/JPY initially fell on yen haven flows, but dollar buying still outweighed the move.
– USD/CHF surged as both currencies competed for safe-haven status, but USD had the clear edge.
– **Biggest Losers:**
– AUD/USD tumbled to fresh multi-year lows, underscoring the Australian dollar’s sensitivity to Chinese economic risks.
– NZD/USD also declined, for similar reasons.
– GBP/USD was pressured, amid existing Brexit concerns.
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### Broader Market Implications
#### Equities and Risk Assets Slide
The tariff surprise knocked equities sharply lower. Major US indices dropped almost 2% in early trading, while Asian and European equities mirrored the sell-off. Corporate earnings optimism was quickly overshadowed by the prospect of protracted trade hostilities.
#### Bond Yields Drop
Safe-haven demand sent US Treasury yields plummeting. The 10-year yield broke below 2%, representing a nearly 20-basis-point decline on the day. The yield curve flattened, stoking fears of a potential economic recession.
#### Commodities Falter
Oil prices plunged over 7%, their steepest drop in months, on fears that new tariffs would curb global growth and crimp energy demand. Gold, in contrast, soared, breaching $
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