Markets don’t like surprises and with new tariffs from former President Donald Trump set to begin on August 1st, traders are bracing for a bumpy ride.
These tariffs could hit some countries with import duties as high as 50%. That’s a big deal. It means prices on goods could rise, trade flows might shift, and markets could swing wildly in response. For traders, that kind of movement can create both opportunity and risk.
We’ve seen this before. Back in 2018 and 2019, Trump’s tariffs sparked sharp reactions across global markets. Stocks dropped, Asian currencies wobbled, and prices of materials like steel and aluminum jumped. This time, the impact could be even bigger. The global economy is already feeling stress from inflation, high interest rates, and slowing growth in countries like China and Germany.
So what’s different now?
For starters, the new tariffs are expected to focus more on China and other countries that Trump sees as trade threats. Reports suggest they may hit electric vehicles, solar panels, and some tech imports. That could rattle the tech sector, energy markets, and the broader supply chain.
Many traders are preparing by looking at futures contracts, hedging strategies, or even betting on currency moves, especially between the U.S. dollar and the euro or Chinese yuan. When tariffs go up, currencies often move in reaction to changing trade balances and investor sentiment.
But it’s not just professionals watching this unfold.
Even casual investors or people with retirement accounts could see some ripple effects. If stock markets turn volatile, it could show up in mutual funds or ETFs tied to international trade or manufacturing.
We’re not here to give financial advice. But we will explain what’s happening, why it matters, and how different types of traders – from day traders to long-term investors are thinking about the days ahead.
Let’s take a closer look.
The Impact of Tariffs on Forex
Tariffs and Forex: Are they connected? Yes! Tariffs are intimately connected with forex, because the original purpose of foreign exchange is to pay and get paid for products in a different currency. Tariffs directly affect the price that is paid for imported products, which directly affects the demand (and supply) of currencies. That’s besides the effect that tariffs have on interest rates, which also drives currency moves. So, forex traders need to keep a close eye on what’s going on with tariffs, and their impact on currencies the impact of tariffs on currencies.
Typically, when a country applies tariffs, its currency gets stronger. This is, actually, one of the reasons historically for why governments have been eager to apply tariffs. The normal state of trade up until quite recently, and still in most of the world, is for tariffs to be applied on cross-border trades.
Forex and Trade Wars: A Tariff War is Likely
Countries have a strong incentive to put tariffs on foreign goods. It increases revenue for the government, it makes their own products more competitive, and strengthens their currency. The downside is if other countries apply tariffs. It’s generally accepted among economists and the “developed world” or “global North” (pick your euphemism) that free trade among countries is better, because everyone benefits. But if one country can get away with tariffs without having its own products being tariffed, then it will be eager to find an excuse to apply the tariffs.
This is why when Trump has threatened tariffs, the targets have immediately suggested slapping tariffs of their own, and even more onerous ones. With politicians eager for any excuse to apply tariffs, there is a very clear risk of “escalation”. A 10% tariff by America, for example, can provoke a 20-30% “punitive” tariff in response. Followed by a further escalation by the US in response since the “winner” is whoever has higher tariffs. This has happened in the past, and the inevitable slowdown in global trade has generated worldwide recessions.
Impact of Trump’s Tariffs on the EUR/USD Pair
Trump’s new tariffs, newly announced and newly formed to take place August 1st, have begun to alter the currency markets, particularly the EUR/USD. With the euro prevailing, the dollar is under pressure and is now struggling to maintain its previously held value. As of July 24, the EUR/USD also reported an increase with a value of 1.1735; while this is a slight decline from recent highs, the increase trend from the previous weeks is quite notable.
The euro’s increase is linked to the U.S. sentiment weakening, as well as the ECB’s decision to maintain the interest rate of 2% which the eurozone is currently benefiting from. On the other hand, US entities are changing their exposures as the fears of tariffs increases. With US interest rates currently sitting between 4.25% and 4.50%, the traditional appeal of the dollar is countered by worries of economic instability. This is a double-edged sword for Forex traders, particularly those betting on short-term EUR/USD swings.
How Bad is It?
The limiting factor for applying tariffs is economic growth. As tariffs increase, the economy experiences a slowdown. So, if a country has a fast growing economy, it can ‘afford’ to have some degree of a tariff war. This is why, for example, China with its 5.0% annual growth rate has tariffs of its own already applied and isn’t so worried about the latest round by Trump, even if it’s an export-oriented economy.
For example, the US has a growth rate of 2.5%, while Canada has a growth rate of 1.1%. Setting aside the size difference, if a trade war slows economic growth by 1.5%, then the US will grow at a 1.0% while Canada falls into recession at -0.4%. That difference will be magnified depending on the rate of trade dependence and size between the countries. Therefore, countries with high trade deficits against the US, and with slow growing economies, are particularly vulnerable to tariffs.
Currency Strength and Tariffs: How It Affects Currencies
Since the announcement of the tariffs over the weekend, stock markets have tanked, and the dollar shot higher. However, the response was relatively muted – the CAD lost “just” 2.0% against its southern counterpart. The Mexican peso had a similar move.
And that’s potentially because traders are acting in the way that got the tariffs applied in the first place: They don’t believe that situation will last long. It seems that Ottawa was confident that Trump wouldn’t go through with his threat. But as discussed previously, in order for a threat to have meaning, it can’t be just a bluff. It seems some traders are thinking that now that Trump is shown to be serious, then a negotiated settlement can be reached quickly.
Historically, Trump did apply and then withdrew tariffs on Canada after getting concessions. The issue is that it’s not exactly clear what Trump is demanding, and why Canada in particular is unwilling to comply. That could be the difference for how long the current tariff.
The Tariff Deadline Is Looming – What’s New?
It’s difficult to believe when looking at the day-to-day price changes or when tracking the intraday moves, but generally. Nothing’s happening. At least nothing out of the ordinary given USD Index’s post-breakout pause.
The USD Index is consolidating, and while it moved very insignificantly below its April low, it remains clearly above its declining support line, which is the clearest indication that the trend has already changed.
As the USD Index remains above its declining support line, the GDXJ remains below its rising resistance line. The bearish implications of GDXJ’s confirmed breakdown remain very much intact.
Besides, it seems that given the looming tariff deadline, it seems that we’ll see a bottom and then strength in the USD Index any day (or hour) now. This is based on what we previously saw during tariff-related deadlines.
Tariff Deadline Extension Analysis
The previous tariff deadline situation centered around June 1st, 2025, when Trump initially threatened to impose 50% tariffs on European Union imports. However, on May 25th, 2025 – just 6 days before the deadline – Trump agreed to postpone this deadline to July 9th following a phone call with EU Commission President Ursula von der Leyen. This represented a clear pattern of last-minute flexibility that markets began to anticipate.
The July deadlines presented a more complex scenario, with July 8th marking the expiration of a 90-day pause on “reciprocal tariffs” and July 9th being the extended EU deadline. Importantly, Trump signaled his flexibility much earlier this time. On June 27th, 2025 – about 11-12 days before the deadlines – he stated “No, we can do whatever we want” when asked if the July deadlines were set in stone, indicating they could be extended or shortened. This earlier communication of flexibility represents a key difference from the June pattern.
What makes this particularly relevant for USD Index analysis is that the dollar bottomed on July 1st, 2025 – precisely 7-8 days before the July deadlines. This timing wasn’t coincidental. The market had learned from the June experience that Trump tends to provide flexibility around tariff deadlines, and the July 1st USD bottom occurred right after his June 27th comments about deadline flexibility. Markets essentially front-ran the expected postponement.
Looking at the current August 1st deadline, we can draw several important lessons. If the historical pattern holds, we might expect some form of communication about deadline flexibility approximately 6-12 days before August 1st – which would place it around July 20th-26th, 2025. Given that it’s July 22nd, we’re likely in the middle of this expected communication window.
However, there’s a crucial difference this time. The USD Index has already demonstrated significant strength since its July 1st bottom, breaking above key resistance levels and showing what appears to be a confirmed uptrend reversal. Unlike the previous situations where tariff uncertainty created dollar weakness, the market now seems to be pricing in that tariffs are fundamentally bullish for the USD. This suggests that even if August deadlines are postponed, the USD Index may not revisit the July 1st lows, as the fundamental narrative has shifted from “tariff chaos equals dollar weakness” to “tariff implementation equals dollar strength.”
The pattern suggests that while we might see some near-term USD volatility around potential August deadline communications, any weakness would likely be limited and short-lived compared to the previous cycles, as markets have now embraced the longer-term bullish implications of the tariff policy for dollar strength. That’s exactly what the confirmed breakout indicates on the technical front.
Another medium-term sign pointing to the same thing comes from the analysis of the mining stocks to gold ratio.
The GDXJ to GLD ratio is in the background of the above chart, and the RSI indicator is based on it.
As you can see, each time when the RSI based on this ratio moved above 70 and then below it, it heralded short- or (more often) medium-term declines in the ratio and in gold itself. The orange line represents gold price, but since both: gold and the ratio declined at the same time, GDXJ declined more during those times.
Interestingly, those signals from RSI were not the final tops – these were the leading signals. This means that after we saw them, there was some short-term strength in 3 out 4 cases and the decline started only after those additional small rallies.
Well, we already saw this additional small rally, and the sizes of all recent declines in gold after similar signals were visibly bigger than what we saw so far in gold.
Translation? Gold hasn’t declined enough.
Combining this with what USD’s situation and the whole tariff-related turmoil, it all paints a picture in which the precious metals move much lower in the following weeks.
Is Stocks’ Short-term Top at Hand?
This wouldn’t surprise me as stocks have myriad reasons to move lower, and rising tariffs are just one of them.
The upside target for this short-term trade is likely about to be reached. So, even from this perspective it seems that some kind of turnaround might be at hand.
A top in stocks here could align with a bottom in the USD Index, which could also take place at the same time when gold, silver, and mining stocks form their tops.
All in all, we have very good reasons to expect the USD Index to move higher – much higher – from here. And we have a very good reason to expect platinum – and other precious metals and mining stocks – to move lower. If you’ve been considering making money on this decline – this might serve as a sign that the time to enter positions is running out.