03/04/2025
The escalation of the trade war has severely impacted the US dollar and US stocks, prompting investors to urgently seek safe-haven opportunities.
Recently, the risk of trade wars between the United States and its trading partners has intensified, leading to a weaker dollar and significant declines in major U.S. stock indices, prompting investors to turn to overseas safe-haven assets.
At the same time, major U.S. stock indices generally fell during Tuesday's trading session, as concerns about a global economic slowdown drove up gold prices and safe-haven currencies (such as the Swiss franc and yen).
President Trump fulfilled his promise to impose import tariffs on Canada and Mexico and doubled tariffs on China, a move that quickly raised concerns about the global economic outlook. As the U.S. economy slows down, more and more investors expect the dollar to weaken, and the U.S. Federal Reserve (Fed) may cut interest rates again in the coming months.
The reaction of the U.S. stock market indicates that the escalation of the trade war is affecting global markets. The Nasdaq index entered correction territory on Tuesday, falling 10% from its record closing high on December 16 last year. Financial stocks had the biggest drag on all three major indices, with financial stocks in the S&P 500 leading the decline, dropping 3.6%. The trigger for this wave of decline was the new round of tariffs imposed by the U.S. on imported goods from Mexico and Canada, as well as the additional tariffs on Chinese goods, which officially took effect this Tuesday. Subsequently, China and Canada also imposed retaliatory tariffs on U.S. goods, creating a standoff that could affect the $220 trillion bilateral trade annually.
Overall, the uncertainty and market reactions brought about by the trade war have challenged the dollar's status as a safe haven, and could further impact the global economy and stock market trends.