Deciphering Dollar Declines
Apart from a brief slump in April, global equity markets have mostly taken the policy chaos coming out of the US in their stride. The US benchmark S&P 500 is back at record highs, in part due to AI optimism, and also because investors still think that President Trump’s tariff threats are just bargaining chips. The trade deal with Japan and the EU is case in point, lowering tariffs from the 25% he had threatened to 15%. However, 15% is still very high, and if this is where US tariffs will settle across the board, it will raise the effective tariff rate on US imports to a level last seen in 1930.