If you thought currency markets were unpredictable before, welcome to the Trump era—a world where tariffs, policy tweets, and America First economics make for a wild ride. Forget the usual playbook.
Trading currencies in this environment requires sharp instincts, a stomach for volatility, and a ruthless ability to read between the lines of Trump’s economic agenda through seeking financial advice.
Tariffs are back in a big way, and they’re not just headlines—they’re weapons that shift the entire forex battlefield. But tariffs are only part of the picture. Trump’s policies on taxation, deregulation, and interest rates are equally critical to understanding the dollar’s next move and how global currencies react.
Tariffs – your best frenemy
Trump’s love for tariffs isn’t just about steel and aluminum and other goods—it’s about control.
Every time the administration announces a new wave of duties, the dollar responds.
In early trading on Monday, news of 25% tariffs on all steel and aluminum imports sent the dollar climbing against the Canadian and Australian dollars.
It’s a classic reaction: trade war fears send investors fleeing to safer assets, and in times of uncertainty, the dollar reigns supreme.
But traders need to think beyond the knee-jerk response. Tariffs weaken foreign economies more than they hurt the US—at least initially.
If China retaliates with its own duties on US goods, the yuan feels the pressure. If the EU slaps back, the euro dips. Emerging markets, many of which depend on US trade, get hammered as capital rushes to the dollar for safety.
Strategy tip:
Watch Trump’s tariff timeline closely. When new duties are announced, expect a short-term dollar surge. But when the retaliatory cycle kicks in and global growth takes a hit, the long-term effect could turn against the dollar as recession fears grow. Timing is everything.
Tariffs might be the headline act, but they’re hardly the only policy sending currency markets into chaos. Here are the other key drivers:
Tax cuts and inflation fears
Trump’s tax cuts juiced the US economy, fueling growth and lifting the dollar. But there’s a catch: rising deficits.
As government debt balloons, so do inflation worries. If inflation picks up too quickly, the Federal Reserve steps in with rate hikes, making the dollar even stronger. Traders who ignored this link in early 2018 got burned when a series of hikes sent the greenback soaring.
Strategy tip:
If inflation starts running hot, expect a stronger dollar in the short term. But if debt fears spook global investors, that strength could flip fast. Keep an eye on Treasury yields—when they spike, the dollar follows.
Deregulation and market optimism
Trump’s rollback of financial regulations helped Wall Street, but it also created unexpected currency moves. A booming stock market attracted global capital to US assets, boosting the dollar. However, emerging markets took a hit as investment dollars fled riskier assets in favour of US equities and bonds.
Strategy tip:
If Trump pushes further deregulation, expect the dollar to climb as investors pile into US stocks. But if market confidence wobbles, particularly with fears of an overvalued stock market, the dollar could take a hit as funds flow back into safe-haven currencies like the Swiss franc and Japanese yen.
Geopolitical uncertainty
Let’s not forget the wildcard factor—Trump himself. The unpredictability of his diplomacy, from trade wars to tensions with China and Iran, can send shockwaves through forex markets.
When the world feels unstable, investors seek safety, and that often means the dollar and gold surge while riskier currencies, like the Australian dollar or the Mexican peso, tank.
Strategy Tip:
Keep an eye on political developments, especially trade negotiations. If tensions rise, short risk-sensitive currencies and go long on the dollar and yen.
Trump’s policies make for a high-stakes trading environment where fortunes can be made or lost in hours. Tariffs, tax cuts, and deregulation all play into the dollar’s strength, but they also create ripple effects across global currencies.
The key is to stay ahead of policy shifts, move fast on breaking news, and never assume the market has priced in the full effect of Trump’s next move.
Want to thrive in forex in the Trump era? Stay sharp, stay cynical, and above all—stay ahead of the tweetstorm with independent, professional financial advice.
Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or trading advice. Currency markets are highly volatile, and past performance is not indicative of future results. Readers should conduct their own research and consult with a professional financial advisor before making any investment decisions. The author and publisher are not responsible for any financial losses incurred from actions taken based on this content.
Nigel Green is deVere CEO and Founder
Also published on Medium.
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