Forex News
- AUD/USD attracts fresh sellers following the release of softer-than-expected Australia’s Q1 GDP.
- Geopolitical risks and Fed rate hike bets act as a tailwind for the USD, also weighing on spot prices.
- The mixed technical setup warrants some caution before positioning for any further depreciation.
The AUD/USD pair meets with a fresh supply during the Asian session on Wednesday and reverses a major part of the previous day's positive move. Spot prices, however, remain confined within a familiar range held over the past week or so and manage to hold above the 0.7150 level.
Data released earlier today showed that Australia's economy grew 0.3% in the first quarter (Q1) of 2026, marking a significant slowdown from the 0.8% rise in Q4 2025 and missing estimates for a 0.5% increase. Adding to this, Australia's softer consumer inflation figures and a rise in the Unemployment Rate to the highest in about four-and-a-half years in April dampen bets for an interest rate hike by the Reserve Bank of Australia (RBA) in June.
This, in turn, overshadows the upbeat China Services PMI and exerts some pressure on the Aussie. Meanwhile, the uncertainty over US-Iran peace talks, along with hawkish US Federal Reserve (Fed) expectations, continues to act as a tailwind for the US Dollar (USD) and turns out to be another factor weighing on the AUD/USD pair. The lack of follow-through selling, however,
warrants some caution before positioning for any further depreciation.
From a technical perspective, spot prices retain a constructive near-term bias above the 50-day Simple Moving Average (SMA), with a cluster of Fibonacci retracements acting as layered support. Furthermore, the Relative Strength Index (RSI) hovers just above the neutral band around 51, suggesting modest underlying buying interest. However, the Moving Average Convergence Divergence (MACD) stays slightly negative, hinting that upside momentum is positive but not yet robust.
The mixed setup suggests that any subsequent fall below the 23.6% Fibonacci retracement of the March -May upswing, around 0.7165, is likely to find decent support near the 50-day SMA at 0.7118. This is followed by the 38.2% retracement support near 0.7102 if a deeper pullback unfolds. On the topside, the next significant barrier sits at the recent cycle high near 0.7267. A daily close above this level would be needed to reinforce the bullish structure and open the way for further gains.
(The technical analysis of this story was written with the help of an AI tool.)
AUD/USD daily chart
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.05% | 0.03% | -0.05% | 0.07% | 0.14% | 0.19% | 0.15% | |
| EUR | -0.05% | -0.03% | -0.07% | 0.04% | 0.09% | 0.16% | 0.10% | |
| GBP | -0.03% | 0.03% | -0.06% | 0.04% | 0.12% | 0.17% | 0.11% | |
| JPY | 0.05% | 0.07% | 0.06% | 0.09% | 0.16% | 0.19% | 0.16% | |
| CAD | -0.07% | -0.04% | -0.04% | -0.09% | 0.07% | 0.14% | 0.07% | |
| AUD | -0.14% | -0.09% | -0.12% | -0.16% | -0.07% | 0.06% | -0.02% | |
| NZD | -0.19% | -0.16% | -0.17% | -0.19% | -0.14% | -0.06% | -0.06% | |
| CHF | -0.15% | -0.10% | -0.11% | -0.16% | -0.07% | 0.02% | 0.06% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
- USD/CHF rises as stalled US-Iran talks and Middle East tensions fuel safe-haven demand for the US Dollar.
- US Dollar remains firm as the Strait of Hormuz closure raises energy prices and inflation, keeping Fed rates higher for longer.
- SNB's Schlegel said that the central bank is ready to intervene against CHF overvaluation pressures from Middle East conflicts.
USD/CHF extends its gains for the third successive day, trading around 0.7880 during the Asian hours on Wednesday. The pair gains ground as the US Dollar (USD) remains firm, driven by stalled US-Iran peace negotiations and renewed tensions in the Middle East, continued to underpin safe-haven demand.
US Central Command (CENTCOM) announced Tuesday that it successfully defeated a series of Iranian missile and drone strikes targeting Kuwait and Bahrain. In response to the regional aggression, US forces also executed self-defense strikes against military targets on Iran’s Qeshm Island, per ABC News.
The Strait of Hormuz closure threatens to drive energy prices higher and intensify global inflationary pressures, reinforcing expectations that the Federal Reserve (Fed) will maintain elevated interest rates for an extended period.
Following a revised, more-than-two-year low of CHF 2.6 billion in March, Switzerland's Trade Surplus rebounded to CHF 3.2 billion in April. This expansion was driven by a 3.0% month-over-month decline in imports (falling to CHF 19.0 billion), while exports ticked up 0.1% to reach a three-month high of CHF 22.3 billion.
Swiss National Bank (SNB) Chairman Martin Schlegel stated on Tuesday that the real overvaluation of the Swiss Franc (CHF) is significantly lower than its nominal overvaluation. Schlegel added that the central bank has heightened its readiness to intervene in the foreign exchange market to counter overvaluation pressures stemming from the escalating conflict in the Middle East.
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
- WTI price climbs to near $92.90 in Wednesday’s early European session.
- Iran fired missiles at Kuwait and Bahrain; diplomatic talks between the US and Iran showed little progress.
- US crude oil inventories fell 6.75M barrels last week, said API.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $92.90 during the early European trading hours on Wednesday. WTI price rises amid growing doubts over the possibility of a peace deal between the United States (US) and Iran. The release of the Energy Information Administration (EIA) report will be published later on Wednesday.
The United States Central Command (CENTCOM) said on Tuesday that Iran launched ballistic missiles toward regional neighbors Kuwait and Bahrain but failed to hit targets. CENTCOM further stated that American forces conducted strikes on Iran's Qeshm Island in response to the attempted attacks.
"The stalling in the U.S.-Iran negotiations and IEA warnings of critical global low stock levels are adding upward layers in risk premium in benchmark prices," said Emril Jamil, a senior analyst for oil at LSEG.
Iranian media reported on Tuesday that Tehran has not communicated with Washington for a few days, though US President Donald Trump said negotiations had been going on continuously. Signs of a prolonged war in the Middle East could raise fears of supply disruption and boost the WTI price in the near term.
US crude oil inventories continued their downward plunge last week. According to the American Petroleum Institute (API) report, crude oil stockpiles in the US for the week ending May 29 fell by 6.75 million barrels, compared to a decline of 2.8 million barrels in the previous week. The market consensus was for 3.6 million barrels.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
- The Indian Rupee declines at open against the US Dollar as oil prices extend recovery.
- FIIs have remained net sellers in the first two trading days of June.
- Economists expect the RBI to hold the Repo Rate steady on Friday.
The Indian Rupee (INR) opens on a negative note against the US Dollar (USD) on Wednesday. The USD/INR pair jumps to near 95.67 as oil prices extend recovery due to renewed hostilities in the Middle East region, and the continuous outflow of foreign funds from the Indian stock market.
At press time, the WTI Oil price trades 1.4% higher to near $93.00, the highest level seen in over a week. Oil prices started recovering from May 29, following the announcement of revisions by United States (US) President Donald Trump in the agreement provided to Iran for a permanent ceasefire.
Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high oil price environment.
Meanwhile, a report from Reuters has stated that the Indian central bank likely selling US Dollars to limit Indian Rupee's losses.
US forces retaliate after Iran attacks
Late Tuesday, the US Central Command (CENTCOM) said that it had intercepted and defeated a series of Iranian missile and drone attacks targeting regional neighbors, including Kuwait and Bahrain, while also carrying out self-defense strikes on Iran’s Qeshm Island in the Strait of Hormuz, renewing fears of a war resumption in the Middle East.
This came at a time when US President Donald Trump announced, through a post on Truth Social earlier this week, that Israeli Prime Minister (PM) Benjamin Netanyahu won’t attack Lebanon, and there will be no strikes between them after several Iranian officials warned attacks on Lebanon are non-compliant with the ceasefire.
FIIs continue to pare stake in Indian stock market
Renewed uncertainty over the US-Iran deal has prompted caution among overseas investors toward the Indian stock market. On Tuesday, Foreign Institutional Investors (FIIs) sold a significant amount of shares worth Rs. 8,362.92 crore. FIIs were also net sellers on the first day of June on Monday, in which they offloaded their stake worth Rs. 3,911.68 crore.
RBI’s monetary policy awaited
The three-day Reserve Bank of India (RBI) policy meeting has started, and it will announce the monetary policy on Friday. According to a PTI poll, 11 respondents expect the RBI to maintain the repo rate at current levels in the June policy review, while four foresee a 25-basis-point (bps) increase, The Times of India (ToI) reported.
Investors will pay close attention to RBI Governor Sanjay Malhotra’s comments on the economic and the inflation outlook.
The same day, India’s Q1 Gross Domestic Product (GDP) data will also be published, which is expected to arrive lower at 7.2% from the previous reading of 7.8%.
Technical Analysis: USD/INR returns above 20-day EMA
USD/INR trades higher at around 95.67 in the opening session on Wednesday. The near-term trend of the pair appears to be turning bullish as it has returned above the 20-day Exponential Moving Average (EMA), which is at 95.43. The positioning of price over this dynamic support suggests buyers retain control, while the Relative Strength Index (RSI) around 54.9 stays in neutral territory, hinting at steady rather than overheated upside momentum.
On the downside, initial support is defined by the 20-day EMA at 95.43, where a break could open the door to a deeper correction toward the May 29 low at 94.46, followed by the May 07 low at 94.03. Looking up, the pair could hope to reclaim the all-time high of 97.09 if it manages to extend its recovery above the June 2 high at 96.19.
(The technical analysis of this story was written with the help of an AI tool.)
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
- USD/JPY pauses for a breather as a fresh intervention warning helps limit JPY losses
- Economic risks stemming from the Middle East conflict cap the JPY and support the pair.
- The bullish USD sentiment backs the case for further gains amid a constructive setup.
The USD/JPY pair enters a bullish consolidation phase on Wednesday, oscillating in a narrow range just below the 160.00 psychological mark, or a one-month high touched during the Asian session. Verbal intervention by Japan’s Finance Minister Satsuki Katayama offers some support to the Japanese Yen (JPY), which, along with a subdued US Dollar (USD) price action, caps spot prices.
However, economic concerns stemming from the conflict in the Middle East and the effective closure of the Strait of Hormuz hold back the JPY bulls from placing aggressive bets. In contrast, the lack of breakthrough in US-Iran peace negotiations, along with hawkish US Federal Reserve (Fed), acts as a tailwind for the safe-haven US Dollar (USD) and helps limit downside for the USD/JPY pair.
From a technical perspective, this week's move beyond the 78.6% Fibonacci retracement level of the late April-early May downswing comes on top of the recent solid bounce from the 200-day Exponential Moving Average (EMA) and favors bulls. Adding to this, the Relative Strength Index (RSI) around 61 suggests firm but not overextended upside momentum. Moreover, the Moving Average Convergence Divergence (MACD) remains in positive territory, hinting that buyers still retain control despite the proximity of recent cycle highs.
On the topside, immediate resistance is aligned with the late April swing high near 160.78, where a clear break would reopen the path toward fresh highs. On the downside, initial support is seen at the 78.6% retracement at 159.55, followed by the 61.8% level at 158.58 and the 50% retracement at 157.90. Deeper pullbacks would look to the 38.2% level at 157.22 and the 23.6% retracement at 156.38, ahead of a stronger demand area created by the 200-day EMA at 155.77 and the structural floor near 155.03.
(The technical analysis of this story was written with the help of an AI tool.)
USD/JPY daily chart
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
Gold prices fell in India on Wednesday, according to data compiled by FXStreet.
The price for Gold stood at 13,808.85 Indian Rupees (INR) per gram, down compared with the INR 13,854.57 it cost on Tuesday.
The price for Gold decreased to INR 161,063.40 per tola from INR 161,597.00 per tola a day earlier.
Unit measure | Gold Price in INR |
|---|---|
1 Gram | 13,808.85 |
10 Grams | 138,088.40 |
Tola | 161,063.40 |
Troy Ounce | 429,501.80 |
FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
(An automation tool was used in creating this post.)
European Central Bank (ECB) policymaker and the head of Belgium's central bank, Pierre Wunsch, said in an interview with Financial Times (FT), released on Wednesday, that the likelihood of central bank tightening monetary conditions in the policy meeting next week will remain firm, even if the United States (US) and Iran announce a permanent peace deal before the meeting.
"If a peace deal is confirmed just before the meeting, it will be part of the discussion. But we won't know whether it will last or be credible," Wunsch told the newspaper.
Market reaction
There seems to be no impact of ECB Wunsch's comments on the Euro (EUR). As of writing, EUR/USD trades subduedly at around 1.1625.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
The United States (US) plans to impose fresh tariffs of at least 10% on imports from major trading partners due to forced-labor practices. India may face a higher 12.5% tariff, the Mint news agency reported on Wednesday.
US Ambassador Jamieson Greer said that "the failure of our most important trading partners to address the importation of goods made with forced labor is unacceptable. This creates a dynamic where American workers are forced to compete globally on an unlevel playing field.”
On Tuesday, the United States Trade Representative (USTR) stated that 54 of the economies "failed to impose and effectively enforce a forced labor import prohibition." And these countries are likely to face 12.5% levies. This group includes China, Vietnam, India, Taiwan and the United Kingdom (UK).
Market reaction
At the press time, the USD/INR pair is up 0.33% on the day to trade at 95.65.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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