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Dollar surges as Donald Trump’s tariffs shake markets

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Dollar surges as Donald Trump’s tariffs shake markets

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Donald Trump’s tariffs shook markets on Monday, with the US dollar surging, Asian markets falling and US stock futures sliding as investors rush to assess how the levies will affect America’s biggest trading partners. 

The US dollar surged more than 1 per cent against a basket of currencies, sending the Canadian dollar to C$1.473 — the lowest level since 2003. Mexico’s currency slid by more than 2 per cent to 21.15 pesos a dollar while the euro fell 1 per cent.

US stock futures also fell sharply, with contracts tracking the benchmark S&P 500 losing 1.7 per cent and those tracking the Nasdaq 100 sliding 2.3 per cent. European futures also fell, with the Euro Stoxx 50 down 2.6 per cent.

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Trump admitted in a post on Truth Social, his social network, that there would “maybe” be “some pain” from his tariffs. “But . . . it will all be worth the price that must be paid,” he wrote on Sunday.

The US two-year Treasury yield rose by 0.05 percentage points to 4.25 per cent, while the 10-year yield fell by 0.02 percentage points to 4.52 per cent.

In Asia, Japanese equities slid. The export-heavy Nikkei 225 fell 2.4 per cent while the Topix fell 1.9 per cent. The yen weakened 0.2 per cent against the dollar to ¥155.5.

China’s offshore renminbi, which trades freely, slid as much as 0.7 per cent to Rmb7.37 a dollar on Monday morning. Hong Kong’s Hang Seng index was down 1.8 per cent, led lower by Chinese companies listed in the territory. Mainland China’s stock market is closed until Wednesday.

South Korea’s Kospi benchmark shed 2.2 per cent and the won dropped 0.9 per cent against the dollar to Won1,468.8. In Australia the S&P/ASX 200 index fell as much as 2 per cent.

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Weaker currencies can help offset some of the tariffs’ impact.

“There was some optimism in the market that [tariff threats] were just for negotiation, but the market may have underestimated the determination of the Trump administration”, said Jason Lui, head of Asia-Pacific equity and derivative strategy at BNP Paribas.

The steep declines came after Trump on Saturday imposed 25 per cent tariffs on all imports from Mexico and Canada, with a lower 10 per cent levy for Canadian energy, and new 10 per cent tariffs on imports from China. He also last week threatened levies against the EU.

Economists have warned that the tariffs are likely to accelerate inflation in the US, something that pushed up Treasury yields and the dollar following Trump’s election in November.

“The clearest implication is a stronger dollar,” said Eric Winograd, chief economist at AllianceBernstein. “A long dollar position is the cleanest, clearest expression of the trade war that is now being launched.”

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“The currencies that will suffer the most are the ones against whom the tariffs are being imposed,” added Winograd, noting that “there’s a good case to be made that the equity market will suffer a little bit”.

Oil prices also climbed in early Asian trade, with international benchmark Brent crude up 0.6 per cent at $76.13 a barrel.

George Saravelos at Deutsche Bank said the tariff announcements were “at the most hawkish end of the protectionist spectrum we could have envisaged”, and that markets needed to “structurally and significantly reprice the trade war risk premium”.

The Mexican peso has whipsawed in recent weeks as traders have scrutinised the new Trump administration’s announcements for clues about how quickly and how extensive any new levies would be.

“If the tariff stays on for several months the exchange rate will reach new historic highs,” said Gabriela Siller, chief economist at Mexico’s Banco Base, referring to the number of pesos per dollar. “If the tariff stays on it will be a structural change for Mexico . . . and Mexico could go into a profound recession that would take years to come out of.”

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Senate Adopts GOP Budget, Laying the Groundwork to Fund ICE and Reopen DHS

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Senate Adopts GOP Budget, Laying the Groundwork to Fund ICE and Reopen DHS

The Senate early Thursday morning adopted a Republican budget blueprint that would pave the way for a $70 billion increase for immigration enforcement and the eventual reopening of the Department of Homeland Security.

Republicans pushed through the plan on a nearly party-line vote of 50 to 48. It came after an overnight marathon of rapid-fire votes, known as a vote-a-rama, in which the G.O.P. beat back a series of Democratic proposals aimed at addressing the high cost of health care, housing, food and energy. The debate put the two parties’ dueling messages on vivid display six months before the midterm elections.

Republicans, who are using the budget plan to lay the groundwork to eventually push through a filibuster-proof bill providing a multiyear funding stream for President Trump’s immigration crackdown, used the all-night session to highlight their hard-line stance on border security, seeking to portray Democrats as unwilling to safeguard the country.

Democrats tried and failed to add a series of changes aimed at addressing cost-of-living issues, seizing the opportunity to hammer Republicans as out of touch with and unwilling to act on the concerns of everyday Americans.

Here’s what to know about the budget plan and the nocturnal ritual senators engaged in before adopting it.

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The budget blueprint is a crucial piece of Republicans’ plan to fund the Department of Homeland Security and end a shutdown that has lasted for more than two months. After Democrats refused to fund immigration enforcement without new restrictions on agents’ tactics and conduct, the G.O.P. struck a deal with them to pass a spending bill that would fund everything but ICE and the Border Patrol. Republicans said they would fund those agencies through a special budget bill that Democrats could not block.

“We can fix this with Republican votes, and we will,” said Senator Lindsey Graham, Republican of South Carolina and the Budget Committee chairman. “Every Democrat has opposed money for the Border Patrol and ICE at a time of great peril.”

In resorting to a new budget blueprint, Republicans laid the groundwork to deny Democrats a chance to stop the immigration enforcement funding. But they also submitted themselves to a vote-a-rama, in which any senator can propose unlimited changes to such a measure before it is adopted.

The budget measure now goes to the House, which must adopt it before lawmakers in both chambers can draft the legislation funding immigration enforcement. That bill will provide yet another opportunity for a vote-a-rama even closer to the November election.

Democrats took to the floor to criticize Republicans for supercharging funding for federal immigration enforcement rather than moving legislation that would address Americans’ concerns over affordability.

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“This is what Republicans are fighting for,” said Senator Chuck Schumer, Democrat of New York and the Democratic leader. “To maintain two unchecked rogue agencies that are dreaded in all corners of this country instead of reducing your health care costs, your housing costs, your grocery costs, your gas costs.”

Democrats offered a host of amendments along those lines, all of which were defeated by Republicans — and that was the point. The proposals were meant to put the G.O.P. in a tough political spot, showcasing their opposition to helping Americans afford high living costs. Fewer than a handful of G.O.P. senators crossed party lines to support them.

The G.O.P. thwarted an effort by Mr. Schumer to require that the budget measure lower out-of-pocket health care costs for Americans. Two Republicans who are up for re-election this year, Senators Susan Collins of Maine and Dan Sullivan of Alaska, voted with Democrats, but the proposal was still defeated.

Republicans also squelched a move by Senator Ben Ray Lujan, Democrat of New Mexico, to create a fund that would lower grocery costs and reverse cuts to food aid programs that Republicans enacted last year. Ms. Collins and Mr. Sullivan again joined Democrats.

Also defeated by the G.O.P.: a proposal by Senator John Hickenlooper, Democrat of Colorado, to address rising consumer prices brought on by Mr. Trump’s tariffs and the war in Iran; one by Senator Edward J. Markey, Democrat of Massachusetts, to require the budget measure to address rising electricity prices, and another by Mr. Markey to create a fund to bring down housing costs.

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Senator Jon Ossoff, a Democrat who is up for re-election in Georgia, also sought to add language requiring the budget plan to address health insurance companies denying or delaying access to care, but that, too was blocked by Republicans.

While Republicans had fewer proposals for changes to their own budget plan, they also sought to offer measures that would underscore their aggressive stance on immigration enforcement and dare Democrats to vote against them.

Mr. Graham offered an amendment to allocate funds toward a deficit-neutral reserve fund relating to the apprehension and deportation of adult immigrants convicted of rape, murder, or sexual abuse of a minor after illegally entering the United States. It passed unanimously.

Senator Josh Hawley, Republican of Missouri, sought to bar Medicaid payments to Planned Parenthood, which provides abortion and other services, and criticized the organization for providing transgender care to minors. Senator John Kennedy, Republican of Louisiana, also attempted to tack on the G.O.P. voter identification bill, known as the SAVE America Act. Both proposals were blocked when Democrats, joined by a few Republicans, voted to strike them as unrelated to the budget plan.

The Republicans who crossed party lines to oppose their own party’s proposals for new voting requirements were Ms. Collins along with Senators Mitch McConnell of Kentucky, Lisa Murkowski of Alaska and Thom Tillis of North Carolina.

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Ms. Collins and Ms. Murkowski also opposed the effort to block payments to Planned Parenthood.

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Who is John Phelan, the US Navy Secretary fired by Pete Hegseth?

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Who is John Phelan, the US Navy Secretary fired by Pete Hegseth?

The firing of US Navy Secretary John Phelan is the latest in a shakeup of the American military during the war on Iran, now in its eighth week.

The Pentagon said Phelan would leave office immediately.

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“On behalf of the Secretary of War and Deputy Secretary of War, we are grateful to Secretary Phelan for his service to the Department and the United States Navy,” said chief Pentagon spokesperson Sean Parnell. “We wish him well in his future endeavours”.

His firing comes at a critical moment, with US naval forces enforcing a blockade on Iranian ports and ships, and maintaining a heavy presence around the Strait of Hormuz, through which 20 percent of the world’s oil and gas passes during peacetime.

Although the Pentagon gave no official reason for the dismissal, reports indicate the decision was linked to internal disputes, including tensions with Defense Secretary Pete Hegseth.

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Phelan’s removal is part of a broader pattern of dismissals and restructuring within the US military under President Donald Trump’s administration – including during the current war.

So, who is John Phelan, and what impact could his firing have on US military strategy?

Who is John Phelan?

As the US Navy’s top civilian official, Phelan had various responsibilities, including overseeing recruiting, mobilising and organising, as well as construction and repair of ships and military equipment.

He was appointed in 2024 as a political ally of Trump, despite having no prior military or defence leadership experience.

Before entering government, Phelan was a businessman and investment executive, as well as a major Republican donor and fundraiser — a background that is fairly common among Trump appointees and advisers. The US president’s two top diplomatic negotiators, for instance, are Steve Witkoff — a real estate businessman with no prior diplomatic experience – and Trump’s son-in-law, Jared Kushner.

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According to the Reuters news agency, Phelan’s tenure quickly became controversial. He faced criticism for moving too slowly on shipbuilding reforms and for strained relationships with key Pentagon figures, including Hegseth and his deputy, Steve Feinberg.

rump with U.S. Marine Corps Lieutenant General Michael Borgschulte and Secretary of the Navy John Phelan (R) before the game between the Navy Midshipmen and the Army West Point Black Knights at M&T Bank Stadium [File: Tommy Gilligan/Imagn Images/Reuters]

In addition, Phelan was reportedly under an ethics investigation, which may have weakened his standing in the administration.

Navy Undersecretary Hung Cao, who was also reported to have a difficult relationship with Phelan, has become acting secretary. Fifty-four-year-old Cao is a 25-year Navy veteran who previously ran as a Republican candidate for the US Senate and House of Representatives in 2022 and 2024 respectively, but was unsuccessful on both occasions.

Democrats have criticised Phelan’s removal, calling it “troubling”.

“I am concerned it is yet another example of the instability and dysfunction that have come to define the Department of Defense under President Trump and Secretary Hegseth,” said Senator Jack Reed, the top Democrat on the Senate Armed Services Committee.

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Who else has the Trump administration fired since the war with Iran began?

Phelan’s removal is the latest in a series of senior military leaders being fired or are leaving during the US-Israeli war on Iran, in addition to others since Trump was re-elected.

Among the most notable dismissals was Army Chief of Staff General Randy A. George, in the first week of April. George was appointed in 2023 under former US President Joe Biden.

According to reports, Hegseth also fired the head of the Army’s Transformation and Training Command, a unit concerned with modernising the army, and the Army’s chief of chaplains. The Pentagon has not confirmed their dismissal.

Why is Phelan’s dismissal significant?

The 62-year-old’s removal comes during a fragile ceasefire with Iran, as the ⁠⁠US continues to move more naval assets into the region.

The Navy is central to enforcing Trump’s blockade of Iranian ports to restrict Iran’s oil exports and apply economic pressure on Tehran, as the US president looks eager to wrap up the war, which is deeply unpopular to many Americans.

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However, there are no indications that Trump is willing to end the blockade or other naval operations in the Strait of Hormuz, as negotiations between Washington and Tehran have come to a standstill.

Tensions have escalated in recent days after the US military seized an Iranian container ship. The US claimed it was attempting to sail from the Arabian Sea through the Strait of Hormuz to the Iranian port of Bandar Abbas.

Tehran responded by describing the attack and hijack as an act of “piracy”.

Iran has since captured two cargo ships and fired at another.

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Not a Deal-Breaker: White House Downplays Iranian Action Near the Strait

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Not a Deal-Breaker: White House Downplays Iranian Action Near the Strait

Just two weeks ago, President Trump threatened to wipe out Iran’s civilization if it did not open the Strait of Hormuz. Days later, he said any Iranian “who fires at us, or at peaceful vessels, will be BLOWN TO HELL!”

Yet on Wednesday, after Iran seized two ships near the Strait of Hormuz, the White House was quick to argue the action was not a deal breaker for potential peace negotiations.

“These were not U.S. ships,” Karoline Leavitt, the White House press secretary, said on Fox News. “These were not Israeli ships.” Therefore, she explained, the Iranians had not violated a cease-fire with the United States that Mr. Trump has extended indefinitely.

She cautioned the news media against “blowing this out of proportion.”

The surprisingly tolerant tone from the White House suggests Mr. Trump is not eager to reignite a war that he started alongside Israel on Feb. 28 — a war that has proved unpopular with Americans and has gone on longer than he initially estimated.

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The president on Tuesday extended a cease-fire between the United States and Iran that had been set to expire within hours, saying he wanted to give Tehran a chance to come up with a new proposal to end the war.

The American military has displayed its overwhelming might during the war, successfully striking thousands of targets. But it remains unclear whether Mr. Trump will accomplish the political objectives of the war.

The Iranian regime, even after its top leaders were killed, is still intact. Iran has not agreed to Mr. Trump’s demands to turn over its nuclear capabilities to the United States or significantly curtail them. And the Strait of Hormuz, a key passageway for world commerce that was open before the war, remains closed.

Nevertheless, the White House has repeatedly highlighted the military successes on the battlefield as evidence it is winning the war.

“We have completely confused and obliterated their regime,” Ms. Leavitt said on Fox Wednesday. “They are in a very weak position thanks to the actions taken by President Trump and our great United States armed forces, and so we will continue this important mission on our own.”

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The oscillation between threats and a more conciliatory tone has long been one of Mr. Trump’s signature negotiating strategies.

Potential peace talks between the two countries are on hold. Vice President JD Vance had been poised to fly to Islamabad for negotiations. But the trip was postponed until Iran can “come up with a unified proposal,” Mr. Trump said.

The United States recently transmitted a written proposal to the Iranians intended to establish base-line points of agreement that could frame more detailed negotiations. The document covers a broad range of issues, but the core sticking points are the same ones that have bedeviled Western negotiators for more than a decade: the scope of Iran’s uranium enrichment program and the fate of its stockpile of enriched uranium.

Mr. Trump has not spoken publicly about the cease-fire, other than on social media. On Wednesday, he also posted about topics including “my Apprentice Juggernaut” — a reference to his former television show; the Virginia elections, which he called “rigged”; and a new book about Supreme Court Justice Samuel A. Alito Jr.

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