In a significant move that has intensified trade tensions, U.S. President Donald Trump announced a flat 25% import duty on steel and aluminum imports. The decision, which has the potential to further escalate, was reported by Bloomberg as possibly going higher. This move has prompted a cautious stance in global markets, with investors keenly watching for developments. Adding to the anticipation, Federal Reserve Chairman Jerome Powell is set to speak on Capitol Hill later this Tuesday, which could offer crucial insights into the U.S. economic outlook.
The impact of these tariffs reverberated across financial markets. The GBP/USD pair remained under pressure on Tuesday, trading in negative territory around 1.2350. Investors are wary of the implications of the increased import duties amidst a backdrop of trade tensions between the U.S. and China. The return of Donald Trump to the White House as the 47th U.S. President has reignited these tensions, a legacy that began during his previous administration when he first imposed trade barriers on China in 2018.
President Joe Biden, who succeeded Trump, opted to maintain these tariffs and even introduced some additional levies after his tenure began. This continuity of policy underscores the complex economic relationship between the two superpowers. Despite the Phase One trade deal signed in January 2020, which aimed to ease tensions, the economic conflict remains unresolved.
In a surprising twist this Monday, China announced countermeasures in response to Trump's tariffs, catching markets off-guard. Although China's actions were viewed as restrained compared to its potential aggressive stance, the situation remains volatile. President Trump's earlier promise of imposing 60% levies on all Chinese products has not yet materialized, leaving room for further escalation.
Amid these geopolitical tensions, gold has emerged as a standout performer. The precious metal hit a fresh all-time high of $2,942 and surged over 11% for 2025. This surge reflects investors' search for safe-haven assets amid uncertainty. However, gold staged a downward correction from its record high during the Asian session on Tuesday but managed to hold above $2,900. Analysts suggest that while the $3,000 mark is within reach, tail risks could increase from current levels.
Market participants are keenly awaiting Fed Chairman Jerome Powell's testimony before the U.S. Senate Banking Committee at 15:00 GMT. His remarks will be closely scrutinized for any indications of future monetary policy moves, especially in light of recent economic data and escalating trade tensions.