The US dollar strengthened on Friday (July 11th), supported by new tariff threats from US President Donald Trump, which have reignited global trade tensions and triggered a new wave of risk aversion. As tensions escalate, investors have become increasingly cautious, bolstering the greenback's status as a safe-haven asset. This shift in sentiment has pushed the US Dollar Index (DXY) higher, as markets brace for potential monetary policy changes.

The US Dollar Index (DXY), which measures the greenback's value against a basket of major currencies, traded flat during the American trading session ahead of the weekend. Currently, the index is trading near 97.89, up about 0.30% on the day, despite facing some major technical resistance.

US President Donald Trump escalated tariff tensions this week by sending warning letters to more than 20 countries, including major trading partners like Canada, Japan, and South Korea, and threatening smaller economies with tariffs ranging from 15% to 50%, based on their trade relationships with the United States. The letters, shared on Trump's social media platform, Truth Social, reflect his tough stance on trade and warn that the US will impose broad "reciprocal" tariffs unless trading partners agree to more favorable terms.

As part of the latest push, Trump announced a 35% tariff on Canadian imports, effective August 1. In a formal letter to Canadian Prime Minister Mark Carney, the US president cited Canada's alleged failure to prevent the flow of fentanyl into the US, as well as a long-standing trade imbalance and high tariffs on US dairy exports.

The letter warned that any retaliatory tariffs imposed by Canada would be met with equivalent additional levies, in addition to the 35% tariff. Trump also emphasized that goods transported through Canada to avoid duties will be subject to higher tariffs, unless they are produced in the US.

Furthermore, the US President has indicated that all remaining trading partners who have not yet received specific tariff letters or a finalized trade agreement will be subject to blanket tariffs of 15% or 20%. Trump also added that European Union (EU) member states will receive notification of the new tariffs "today or tomorrow." Economists warn that such a sweeping action could raise import costs, fuel inflation, and trigger retaliatory measures, further straining global trade negotiations in the coming months.

Source: FXstreet