USD/CHF ticks up to near 0.7980 in a sour market mood
- USD/CHF trades marginally higher, but is broadly sideways below 0.8000.
- US President Trump mulls to consider increasing tariff blanked for nations that failed to close deal during the 90-day tariff pause period.
- Dismal market sentiment has improved the safe-haven demand of the Swiss Franc.
The USD/CHF pair edges higher to near 0.7980 during Asian trading hours on Friday. The Swiss Franc pair trades broadly stable in a risk-averse market mood, followed by fears of an increase in United States (US) 10% tariff blanket.
On Thursday, US President Trump said in a telephonic interview with NBC news that he will impose a “15% or 20%” tariff blanked on nations that have failed to secure a trade deal during the 90-day reciprocal tariff pause period. “We’re just going to say all of the remaining countries are going to pay, whether it’s 20% or 15%. We’ll work that out now,” Trump said.
This scenario is unfavorble for assets from a lot of countries as Washington has so far closed deal with the United Kingdom (UK) and Vietnam, a limited pact with China and has expressed confidence towards a US-India interim deal.
Meanwhile, dismal market sentiment has improved demand for safe-haven assets, such as Swiss Franc.
Additionally, US President Trump has also sent letter to Canada, specifying a 35% tariff rate, which will be separate from other sectoral levies. He has also threatened to impose tariffs on imports from the Eurozone. However, the 27 nations-led-bloc has stated that it is aiming to reach a deal with Washington before the August 1 deadline.
At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades higher to near 97.90, the highest level seen in two weeks.
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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