The tariff policy adjustments led by the Trump administration have granted the administration the discretion to impose excessive tariffs. While this may narrow the trade deficit in the short term, in the long run, such disorderly policies will disrupt the global economic and trade order, exacerbate inflationary pressures, not only fuel international demands for de-dollarization but also raise concerns about a global economic recession, ultimately weakening the international status of the dollar.

For decades after the war, U.S. tariffs have formed a stable rules system based on multilateral trade agreements and the WTO dispute settlement mechanism. The tariff adjustment process is transparent and predictable, allowing global companies, commodity traders, and foreign exchange funds to position themselves based on the long-term policy framework.

However, the two Trump administrations completely restructured this system: relying on multiple legal authorizations such as Section 301, Section 232, IEEPA, and Section 122, the president can introduce large-scale global tariffs, country-specific additional taxes, and supply chain-specific tariffs at any time without a long legislative process. He can also flexibly add or remove exemption clauses, and even switch between different legal authorizations to maintain the effectiveness of tariffs.

This highly flexible tariff system, lacking long-term constraints, is no longer simply a tool for industrial protection, but has risen to become a core bargaining chip in geopolitical games, energy negotiations, and diplomatic pressure.

Frequent and disorderly policy changes have brought about continuous macroeconomic uncertainty, directly forming two core transaction transmission lines: one is to reshape the fundamentals of US trade, inflation, and interest rates, which will influence the trend of the US dollar index in the medium to long term;

Secondly, it continues to disrupt global market risk appetite, simultaneously driving a revaluation of all commodities, including crude oil, commodity currencies, gold, and US stocks. This is an underlying fundamental variable that cannot be ignored in current foreign exchange and commodity trading.

Tariff policies have a two-way transmission effect, reshaping the bullish and bearish logic of the US dollar exchange rate.

The US dollar's movement is pulled by two completely opposite forces—short-term and medium-to-long-term—related to tariff policies. In trading, it is necessary to distinguish between time cycles to determine the direction of bullish or bearish trends.

In the short term, widespread tariffs can directly suppress the scale of US imports and narrow the trade deficit.

An improved trade deficit will increase global demand for dollar settlements. Coupled with rising tariffs on various imported goods (crude oil, metals, automobiles, and consumer goods) pushing up domestic inflation, the market will price in the Federal Reserve maintaining high interest rates for a longer period. The interest rate differential advantage will directly benefit the dollar, driving the dollar index to strengthen in stages.

At the same time, the United States used tariffs as leverage to force oil-exporting countries and trading partners to maintain dollar settlements and increase their holdings of US Treasury bonds, which further consolidated the demand for dollar circulation in the short term and supported the dollar bulls.

In the medium to long term, unregulated and discretionary tariffs will continue to suppress the attractiveness of the US dollar.

Global trading companies, oil-producing countries, and multinational manufacturing companies cannot predict future tax rate changes, and are therefore hesitant to hold dollar assets for the long term or lock in long-term dollar contracts. This has accelerated the "de-dollarization" of supply chains, and some Middle Eastern and Latin American producing countries are attempting to circumvent the dollar in their crude oil and commodity trade, further weakening the global demand for the dollar as a reserve currency.

Furthermore, tariffs across the entire industrial chain raise production and consumption costs, leading to a contraction in manufacturing investment, the relocation of production capacity overseas by enterprises, and the gradual pricing of the risk of a US economic recession in the market. Recession expectations will suppress the Federal Reserve's room for interest rate hikes, thus forming a bearish logic for the US dollar in the medium to long term.

Country-specific tariffs will also differentiate the strength of non-US currencies: the US has granted tariff exemptions to Canadian and Mexican crude oil and metal products, stabilizing the North American supply chain and benefiting the Canadian dollar and Mexican peso;

Imposing high special tariffs on Brazil and Asian manufacturing countries suppresses the currencies of the corresponding exporting countries; maintaining the Section 301 tariff barrier on China for a long time continues to put downward pressure on the RMB, resulting in a structurally differentiated market in the foreign exchange market.

Tariff policies directly influence market risk appetite and affect the pricing of all trading instruments.

One of the core drivers of market risk appetite is policy predictability, but Trump's discretionary tariffs continue to create uncertainty and suppress risk appetite in the long term. The tightening and easing of tariff policies directly switch the market sentiment cycle.

When the White House suddenly announced new tariffs on a large scale around the world and increased country-specific tariffs, panic spread in the global supply chain, and funds collectively avoided risky assets: crude oil, commodity currencies such as the Australian dollar/Canadian dollar/New Zealand dollar, and US stocks all fell in tandem, while funds flowed into safe-haven assets, pushing up the US dollar, US Treasury bonds, gold, Swiss franc, and Japanese yen.

Taking the implementation of global tariffs on "Liberation Day" in 2025 as an example, the sudden impact of the policy caused a rapid collapse in risk appetite, a sharp correction in crude oil prices, a collective decline in non-US currencies, and a simultaneous surge in safe-haven gold prices.

Conversely, when the United States significantly increases tariff exemptions and reaches bilateral trade agreements with oil-exporting countries and trading partners to ease tariff constraints, the market expects global trade costs to fall and inflationary pressures to ease. Risk appetite recovers rapidly, leading to a rebound in crude oil, cyclical commodity currencies, and US stocks, while safe-haven assets such as the US dollar and gold come under pressure and fall.

Supply chain cost shocks will further amplify the already low risk appetite. Tariffs under Section 232 targeting steel, aluminum, and refining equipment raise production costs in crude oil refining and manufacturing, leading to shrinking corporate profits, significant delays in capital expenditures, and continued market pricing in downward pressure on the US economy. This persistently weak risk appetite continues to weigh on pro-cyclical trading instruments such as crude oil and commodity currencies.

Tariffs implemented, trade deficit narrowing, and inflation rising → bullish for the US dollar; medium- to long-term trading logic: disorderly policies accelerating de-dollarization and rising expectations of economic recession → bearish for the US dollar; key signals to watch: whether the Supreme Court will limit the president's tariff authority, and progress on tariff exemptions in trade negotiations between the US and Middle Eastern oil-producing countries.

Gold possesses both inflation-hedging and safe-haven attributes, and its performance is driven by a unified logic of tariff policies: the White House's disorderly escalation of tariffs leads to a surge in market uncertainty, rising inflation expectations, and a decline in risk appetite, which is usually bullish for gold. However, this year the market is very sensitive to inflation, and gold is also affected by risk appetite and capital flows. This year, the decline in risk appetite and the rise in inflation expectations are both bearish for gold, because the expectation gap between the Fed's rate cuts and rate hikes causes real interest rates to rise along with inflation expectations.

Trading Summary

The current US tariff system has completely deviated from fixed rules, with presidential discretion leading to continuous policy fluctuations, forming the core fundamental theme of exchange rates and commodity markets. In the short term, tariffs raise inflation and narrow the trade deficit, which is beneficial to the US dollar. However, in the long term, disorderly policies foster de-dollarization and recession expectations, suppressing the long-term trend of the US dollar. At the same time, the tightening or loosening of tariffs directly switches market risk appetite, simultaneously driving the US dollar, commodity currencies, crude oil, and gold to move in tandem.

In actual trading, it is necessary to continuously track three major signals: changes in tariff legal authorization, country-specific exemption policies, and trade negotiations between US oil-producing countries. By distinguishing between short-, medium-, and long-term logics to judge the bullish or bearish trend of the US dollar, and taking into account risk appetite cycles, it is also necessary to simultaneously deploy foreign exchange, crude oil, and gold-related products to avoid the risk of disorderly market conditions caused by sudden policy changes.