The dollar fell to a three-month low on Tuesday as concerns about slowing growth and the impact from tariffs on the U.S. economy outweighed any potential boost from the ramping up of levies on Canada, Mexico and China.
President Donald Trump’s new 25% tariffs on goods from Mexico and Canada took effect, along with a doubling of duties on Chinese goods to 20%, at 12:01 a.m. EST (0501 GMT).
In response, China said it will impose additional tariffs of 10-15% on certain U.S. imports from March 10. Canada has said that retaliatory tariffs on the United States would take effect on Tuesday and Mexico is expected to follow suit.
Worries of a trade war and the hit to other countries’ economies might be expected to boost the U.S. dollar, but recent weak economic data has weighed on the currency and bond yields in the United States.
Concerns about duties on imports dominated commentary from manufacturers in the weak Institute for Supply Management survey on Monday, which continued a run of tepid data.
The U.S. dollar index, which tracks the currency against six peers, fell 0.54% to 105.96, its lowest since December.
"While the U.S. is now broadening its tariff regime to Canada and Mexico, weak domestic U.S. activity... is preventing the dollar from strengthening on the tariff news," said Chris Turner, global head of markets at ING.
Investors flocked to traditional safe-haven currencies the Japanese yen and Swiss franc, which were both up almost 1%, as growth and tariff fears knocked global stocks on Tuesday.
