State of US tariffs
At a Glance
The desk is focused on the implications of the impending expiration of the 10% global tariff in July, as detailed by HSBC’s Shanella Rajanayagam. Per the full note, the expiration could prompt shifts in US trade policy that may affect currency valuations and trading positions. The economic landscape surrounding tariffs is complex, as current US tariffs remain in flux and reintroducing tariffs could heighten import costs. The overall consensus sees a cautious but steady trajectory for the USD, impacted by these developments.
Key Takeaways
- 01The expiration of the 10% global tariff in July could impact USD dynamics.
- 02Current tariffs still in effect may influence inflation and trade balances.
- 03Monitoring trade policy shifts is crucial for anticipating currency movements.
- 04Consensus sees a moderate bullish outlook for USD but with divergent firm targets.
Full Analysis
What the desk is arguing
The desk asserts that the end of the 10% global tariff may reshape US trade dynamics, potentially leading to currency fluctuations. As per the note by Rajanayagam, the expiration comes at a time when the US is reviewing its long-term trade strategies, which could introduce significant volatility in FX markets.
Current tariffs, still affecting various sectors, play a substantial role in shaping inflation and trade balances. Changes in these tariffs could directly influence the demand for the USD and sentiment towards commodities linked to trade dynamics, particularly as trade negotiations continue to evolve.
Where it sits in our coverage
Our consensus target for USD valuations sits at 1.075, with a range between 1.04 and 1.12. Aligned firms include: - JPMorgan, targeting 1.10 for March 2026, - Bank of America (BofA) sees a lower projection at 1.04 for the same tenor.
This view aligns with jpmorgan, reflecting a moderate bullish outlook on the dollar amidst potential tariff shifts, while bofa offers a more conservative stance by predicting weaker conditions.
How other firms see it
Aligned firms such as jpmorgan echo a similar optimism regarding the USD, anticipating appreciation tied to upcoming shifts in trade policy. In contrast, bofa adopts a contrarian perspective, expecting the dollar to weaken amidst tariff uncertainties.
Monitor currency pair dynamics, particularly USD/EUR, as figures here reflect broader trends influenced by US trade policy movements and tariff adjustments.
What the calendar says
Currently, there are no high-impact events scheduled in the next 30 days that directly relate to this tariff expiration, but close observation of subsequent trade announcements could provide fresh insights into market sentiment.
Market Implications
Watch for potential shifts in USD valuations particularly surrounding the July tariff expiration, as expectations may lead to increased volatility. A break above 1.075 could signal further dollar strength, while movement below 1.04 might validate bearish positions taken by other market participants.
From the original
With the US’s 10% global tariff set to expire this July, Shanella Rajanayagam , Trade Economist, looks at which US tariffs are currently in effect - and what could be coming down the line. For more content from HSBC Global Investment Research, just search for #HSBCResearch on Lin
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