The US China trade war has now come to the top of the headlines again with US President Donald Trump keen to go ahead with an extra $200 billion worth of tariffs on Chinese goods.
The announcement could come as early as this Thursday which would likely cause the US dollar to rise sharply as investors seek out the safehaven status of the greenback.
Several rounds of strong economic data released from the US last week is also bound to keep the US Federal Reserve on Track to raise interest rates this month which is also going to provide support to the US dollar.
“The dollar edged higher against a basket of major currencies during early trade, as US-China trade tensions boosted its safe-haven appeal. With the U.S. economy growing faster than initially estimated during the second quarter, market expectations remain elevated over a rate hike in September,” said FXTM research analyst Lukman Otunuga.
With the American economy performing strongly, President Trump may feel emboldened to introduce tarrifs against other countries as the strategy seems to be working and he believes it may help his party’s chances at the midterm elections coming up in November.
One recent quote from Trump seems to sum up his future ambitions regarding trade tariffs
“Many things. A toughness of attitude would prevail,” Trump said.
“I’d throw a tax on every Mercedes-Benz rolling into this country and on all Japanese products, and we’d have wonderful allies again.” He added.
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