The United States finds itself at a pivotal moment as President Donald Trump prepares to initiate a series of tariffs that could reshape international trade dynamics. On Saturday, Trump's administration is set to impose tariffs, sparking a rush among global governments and businesses to mitigate potential economic impacts. This move heightens tensions with BRICS nations amid Trump's threats of 100% tariffs if these countries attempt to introduce a new currency to replace the US Dollar (USD).
Trump has also vowed to implement 25% tariffs on approximately $900 billion worth of goods from Canada and Mexico, two of the largest exporters to the United States. In 2024, these countries, along with China, constituted 42% of total US imports. Mexico emerged as the leading exporter, contributing $466.6 billion during this period, as reported by the US Census Bureau.
"We are going to require a commitment from these seemingly hostile countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty US Dollar or, they will face 100% tariff,"
- US President Donald Trump
Meanwhile, the financial markets are closely observing US economic indicators for signs of inflationary pressures. The release of the US Personal Consumption Expenditures (PCE) Price Index data for December at 13:30 GMT is highly anticipated. Market expectations suggest a slight increase in the monthly core PCE reading from 0.1% in November to 0.2%. A higher-than-expected PCE reading could stoke inflation concerns and intensify selling pressure on gold, which recently hit an all-time high.
Gold prices surged past $2,790, reaching a record high of $2,800.93 on Friday. This milestone was achieved amid subdued US dollar price action and stabilizing risk sentiment, leaving financial markets in a state of uncertainty. The first support for the US dollar is identified at $2,721, a key level tested multiple times in November, December, and January before breaking on January 21. The second nearby support stands at $2,709, noted as the low on October 23, 2024.
As tariffs loom, foreign governments and businesses are strategizing to circumvent potential duties and prepare for the economic ripple effects. The imposition of tariffs could potentially trigger retaliatory measures from affected countries, further escalating trade tensions.
Tariffs, traditionally used as customs duties levied on specific merchandise imports or categories of products, have become a focal point in the US administration's strategy to recalibrate trade relations. The announcement of these tariffs has prompted widespread concern among international stakeholders about their potential impact on global supply chains and economic stability.
The European Central Bank has also contributed to the intricate economic landscape by cutting policy interest rates by 25 basis points. This move aligns with market expectations and reflects ongoing efforts to stimulate economic activity within the Eurozone.
In light of these developments, market participants are keenly watching for any shifts in risk sentiment that could influence asset prices. A weaker-than-expected US PCE data release has the potential to drive gold prices even higher, possibly resulting in additional record-breaking highs.