Trump Threatens 'Much Bigger Tariffs', Dollar Value Rises Again [Global Tariff War]

As President Donald Trump of the United States wielded the tariff card against the world, the value of the U.S. dollar surged. The dollar, which had dipped when President Trump did not specify details about universal tariffs during his first week in office, rose again.

Last weekend, President Trump threatened to impose a 25% tariff on Colombia but withdrew it. He also announced tariffs on key items such as semiconductors and pharmaceuticals. He reiterated that he wants "much bigger tariffs."

Regarding this, White House spokeswoman Caroline Levitt stated in her first press briefing on the 28th (local time) that "President Trump's 'America First Trade' agenda, signed on his first day in the White House, includes such tariffs, and further information will be provided." She emphasized that "although specific dates cannot be mentioned, the President is committed to effectively implementing tariffs as he did in his first term."

In this context, Scott Besant, who was confirmed by Congress the previous day as Treasury Secretary, proposed the concept of 'optimal tariff' and suggested gradual tariffs. Also, Steven Myron, the new chairman of the National Economic Council (NEC), argued that the optimal U.S. tariff is '20%' and should be used as a "benchmark."

As President Trump's tariff drive gains momentum, the dollar's value is on the rise. The dollar index surged by 0.5%, fluctuating around the 107.9 mark (as of 5 a.m. Korean time on the 29th). The euro's value fell by about 0.6% against the dollar, and the yen's value fell by about 0.7% against the dollar.

The dollar, which had surged last December, soared to the 110 level on the 13th but declined somewhat after the inauguration (20th). However, as it became clear that President Trump is 'serious about tariffs,' the market is again buying U.S. dollars in preparation for a tariff war.

If tariffs reduce the import of goods or services from abroad, the outflow of dollars decreases. This leads to a strong dollar. Although President Trump has mentioned a preference for a weak dollar, his actual policies lean more towards triggering a strong dollar. Repeated emphasis on dollar hegemony also supports a strong dollar.

The dollar index, which was strong at the end of last year, turned somewhat weak this year but is gaining strength again as President Trump's tariff policy takes shape. / Trading Economics

According to Bloomberg, instability in the stock market due to the cheap model of Chinese AI startup DeepSeek also triggered dollar demand. "Investors are betting on a strong dollar with the expectation that Trump's policies will lead to inflation and rising U.S. interest rates," Bloomberg analyzed.

Andres Rodriguez Clare, a professor of economics at UC Berkeley, in an article co-authored with Arnaud Costinot, a professor at MIT, in Le Monde, pointed out that "the Trump administration views tariffs as a game of chicken, but this is a wrong analogy, and it is more appropriate to view trade wars as a 'prisoner's dilemma.'"

He explained that "the global trade system that emerged after World War II was designed to curb the impulse of beggar-thy-neighbor policies and prevent trade wars like those of the 1930s." He advised that "tariffs should only play a supplementary role in U.S. economic policy."

Washington = Special Correspondent Lee Sang-eun selee@hankyung.com