Trump tariff tensions lift dollar and gold despite market slide

Equity markets slid on Friday as President Trump intensified trade and tariff tensions with Canada. He also hinted at measures targeting Europe, driving investors to seek refuge in gold.

Investors were unsettled when Trump sent a letter late Thursday announcing a 35% levy on all Canadian imports effective August 1, and indicating that the EU would be informed by Friday.

Trump’s wide-ranging trade measures have disrupted global businesses, as mentioned in a Reuters report. He has suggested raising the general U.S. duty on other countries from the existing 10% to as much as 15–20%.

Earlier in the week, he caught Brazil off guard by imposing 50% tariffs on items such as copper, pharmaceuticals, and semiconductors.

European and U.S. indexes slip after strong week

European STOXX 600, which had gained roughly 2.2% earlier in the week, declined by 0.7% on Friday. Meanwhile, U.S. S&P 500 and Nasdaq futures each slipped around 0.6%, hinting at a retreat from this week’s peaks.

“The market is becoming a bit numb to these announcements,” said City Index strategist Fiona Cincotta. “We might not see a big reaction until hard data shows the effect. There is still hope that talks could lead somewhere. Nothing feels final.”

Earlier, Trump delayed the July 9 tariff implementation to August 1 for several partners, aiming to grant additional negotiation time. He also expanded his measures to include allies such as Japan and South Korea, and slapped a 50% duty on copper.

According to Joseph Capurso, head of international economics at the Commonwealth Bank of Australia, the 35% rate on Canada still comes with extensive exemptions under the USMCA.

“The bigger question is what comes for the EU,” he said. “If it looks like the China tariffs in April, that would be very destabilizing.”

Wall Street wrapped up Thursday at all-time highs, pushed by Nvidia’s breakthrough past a $4 trillion valuation amid robust AI-chip demand.

In raw materials, gold extended its rally for a third session, advancing 0.6% to $ 3,342 per ounce and boosting July’s gains to roughly 1.2%.  Meanwhile, Treasuries saw sell-offs, driving 10-year yields up by 3 basis points to 4.38% after a surprise drop in jobless claims.

Market participants are watching second-quarter earnings next week for signs of tariff fallout, with JPMorgan Chase set to report on Tuesday.

Crude oil continued its downward trend from the prior session, pulling Brent futures down by almost 2% to $ 68.88 a barrel.

U.S. dollar remains firm amid fresh tariff announcement

The U.S. dollar jumped 0.3% to C$1.3695. After an initial 0.5% sell-off, the Canadian dollar slid a further 0.22% on Trump’s announcement.

The euro also eased 0.1% to $1.1688, poised for a weekly decline of nearly 0.9% amid speculation of potential new EU tariffs.

“Negotiators in Europe must now wonder if they face the same squeeze Canada felt,” said Piotr Matys, senior FX strategist at InTouch Capital Markets.

So far, the market response has been milder than April’s slump following the initial U.S.-China duties.  Still, uncertainty around the August 1 deadline has supported the dollar, lifting the trade-weighted index 0.2 % to 97.79 and driving a weekly advance of 0.8%, the largest since February.

The greenback received an additional boost since strong job reports and Fed meeting notes showed rates probably won’t be cut soon

“Most investors see this dollar strength as a short-term correction, not a lasting turnaround,” Matys added. “After all, these policies have chipped away at the dollar’s role as the top reserve currency.” Year-to-date, the dollar index remains about 9% below its levels.

The yen, traditionally a safe-haven currency, slid as prospects for a U.S.-Japan trade agreement receded. The dollar climbed 0.4% to 146.76 yen, marking a 1.6% weekly gain, the biggest since the beginning of the year.

Brazil’s real weakened to 5.532 per dollar, set for roughly a 2% weekly decline, its worst in almost five months. President Luiz Inacio Lula da Silva indicated he was pursuing diplomacy but warned of reciprocal action should the tariffs take effect on August 1.

The pound fell 0.31% to $1.3538, its weakest in two weeks, after data showed the UK economy shrank again in May.

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