Pound Surges Against Dollar Trump’s New Car Tariffs Shake Forex Markets
Pound Gains Momentum as Trump Imposes Auto Tariffs
The British pound (GBP/USD) climbed against the US dollar on Thursday, recovering from earlier losses as markets reacted to former President Donald Trump’s announcement of steep new tariffs on imported automobiles. The dollar index (DXY) remained subdued at 104.51, reflecting broader uncertainty over the policy’s economic implications.
Trump’s Tariff Decision Sparks Forex Volatility
Trump revealed a 25% tariff on imported cars and select car parts, set to take effect on April 2, claiming the move would “spur growth like never before.” The announcement immediately rippled through currency markets, with the pound rising 0.3% to reclaim the $1.29 level after a dip triggered by the UK’s spring budget statement.
The UK Chancellor, Rachel Reeves, had earlier unveiled deeper spending cuts, prompting the Office for Budget Responsibility (OBR) to slash its 2025 GDP growth forecast to 1%—down sharply from 2%. While austerity measures initially weighed on sterling, Trump’s tariffs shifted focus to dollar weakness, propelling the GBP/USD pair upward.
Global Backlash: EU and Canada Condemn Tariffs
International leaders swiftly criticized the US trade policy. European Commission President Ursula von der Leyen called the tariffs “bad for businesses, worse for consumers,” while Canadian Prime Minister Mark Carney labeled them a “direct attack on Canadian workers.” Carney vowed to defend national interests, stating, “We will protect our workers, companies, and economy—together.”
Trump retaliated on Truth Social, threatening even higher tariffs if the EU and Canada collaborated to “harm the USA economically.”
Key Takeaways for Forex Traders
- GBP Resilience: Despite UK growth concerns, the pound found support as the dollar stumbled post-tariff news.
- Dollar Index Pressure: The DXY’s stagnation suggests lingering doubts about the tariffs’ long-term impact on US trade relationships.
- Political Risks: Escalating trade tensions could heighten volatility in major currency pairs, including GBP/USD and EUR/USD.
What’s Next for the Pound?
Analysts warn the pound’s rally may be tested by dual headwinds: weak UK growth projections and ongoing US trade policy unpredictability. Traders should monitor:
- US-EU/Canada Negotiations: Will retaliatory measures emerge?
- UK Fiscal Strategy: Can spending cuts stabilize the economy without stifling recovery?