Dollar Weakness and Tariff Crosscurrents Shape Currency Markets
The US dollar has declined 10.7% year-to-date, marking one of its steepest first-half drawdowns on record. This weakness emerges as the TRUMP administration shifts focus back to tariffs, creating complex crosscurrents for currency markets.
Current effective tariff rates on US imports approximate 21%, down sharply from 54% during Liberation Day's peak. The delayed collection mechanism means actual duties collected remain roughly half the stated rate, creating a lagged economic effect.
Market mechanics suggest the dollar serves as the primary pressure valve for tariff impacts, absorbing the aggregated consequences of trade policy shifts. This dynamic occurs alongside evolving monetary policy expectations, creating layered challenges for currency traders.
