During today's Asian trading, the US dollar declined slightly against major currencies, but remains near a 3-week high, while investors analyze the news that Donald Trump slapped a 25% tariff on cars not made in the country. The currency market reaction to the announcement was muted, but automaker shares fell sharply.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.08% to 104.47. Trump White House aide Will Scharf said the new duties apply to “foreign-made cars and light trucks” and come in addition to tariffs that are already in place. These new tariffs will go into effect April 2. He estimated that the measures will result in “over $100 billion of new annual revenue” to the U.S. But the full details of the proclamation remain unclear, as most cars consist of parts from various countries. Analysts said that vehicles assembled in the U.S. will also be impacted, though at a lower level, based on the makeup of its foreign parts. In addition, Donald Trump threatened to impose “far larger” tariffs on the European Union and Canada if they work together to combat trade tariffs. The EU and Canada have yet to issue any statement suggesting they would unite to harm the U.S., but both have signaled that they could retaliate to the latest impositions. Investors fear that trade duties will slow down the growth of the US economy and potentially spur inflation again, although the prospect of narrower-than-feared tariffs has recently supported sentiment.
The Chinese yuan rose 0.1% against the U.S. dollar, despite weak Chinese data that showed that industrial profits fell 0.3% in the first two months of 2025, reflecting ongoing economic challenges, including deflationary pressure and escalating trade tensions with the U.S. This follows a 3.3% decline in 2024. marking the third consecutive annual contract. December had seen an 11% profit rebound, but the early 2025 figures suggest persistent struggles for businesses. The National Bureau of Statistics (NBS) attributed the decline to a complex external environment, with firms facing operational difficulties. U.S. tariffs have pressured Chinese exporters, forcing price reductions to remain competitive. The automotive sector saw an 8% profit drop in 2024, while the mining industry experienced a steep 25.2% decline in early 2025. Despite challenges, state-owned enterprises recorded a 2.1% profit increase in the first two months, while foreign-invested firms saw a 4.9% rise. The manufacturing and utilities sectors also showed growth, with profits increasing by 4.8% and 13.5%, respectively. However, private-sector companies faced a 9% decline.