Currency Crossfire: How Major Currencies May Move Against the US Dollar Amid the Tariff War

As the tariff war between economic superpowers like the US and China intensifies, its ripple effects are shaking not just trade routes and stock markets—but also the world of currencies. The US Dollar (USD), being the world’s reserve currency, often sits at the center of these storms. But how are other major currencies expected to respond as the conflict unfolds?

Let’s take a closer look at how the Euro (EUR), British Pound (GBP), Japanese Yen (JPY), Swiss Franc (CHF), and Canadian Dollar (CAD) might perform against the USD in the months ahead.

1. Euro (EUR): Pressured by Economic Slowdown and Diverging Policies

The Eurozone is already grappling with economic stagnation, and the tariff war only adds to its woes by affecting exports and investor confidence.
Expected Impact:

• The EUR/USD pair may remain under pressure.
• If the European Central Bank (ECB) maintains dovish policies while the Fed delays cuts, the EUR could weaken further.

What to Watch: German exports and ECB monetary policy direction.

2. British Pound (GBP): Stuck Between Inflation and Global Tensions

The GBP is facing a double whammy—domestic inflationary pressures and global economic instability. While a weakening USD might offer brief relief, ongoing volatility in trade and energy markets could offset gains.

Expected Impact:

• GBP/USD could show short-term resilience, but long-term uncertainty may limit upside.

What to Watch: Bank of England rate decisions and UK economic data.

3. Japanese Yen (JPY): The Classic Safe Haven

The Yen traditionally strengthens during global uncertainty. As markets turn risk-averse amid tariff threats, investors often flock to the JPY.

Expected Impact:

• JPY may strengthen against the USD if the trade war escalates.
• However, if Japan's own economic performance dips, the rally may be short-lived.

What to Watch: Global equity market trends and safe-haven flows.

4. Swiss Franc (CHF): Stability Amidst Chaos

Known for its neutrality and economic stability, the Swiss Franc is another safe-haven currency. In times of global tension, it tends to gain ground as investors look for secure holdings.

Expected Impact:

• CHF may appreciate against the USD if the global trade war continues to escalate.
• The Swiss National Bank may intervene if gains become too strong, affecting export competitiveness.

What to Watch: SNB interventions and European risk sentiment.

5. Canadian Dollar (CAD): Tied to Oil and Trade Stability

The CAD often mirrors the performance of crude oil, one of Canada's major exports. Tariff uncertainty can indirectly affect oil demand, hence influencing the CAD.

Expected Impact:

• CAD may face volatility, especially if oil prices fluctuate due to global demand shifts.
• However, Canada’s stable trade ties with the US may provide some buffer.

What to Watch: Crude oil prices and Bank of Canada outlook.

Conclusion: Dollar Strength May Be Temporary

While the US Dollar typically strengthens in the early stages of global turmoil due to safe-haven demand, prolonged trade wars eventually erode confidence in all fiat currencies. If the Fed begins aggressive rate cuts in response to slowing growth, the USD’s dominance may weaken—opening doors for selective strength in other majors.

Pro Tip for Traders & Investors:
Keep a close eye on central bank decisions, geopolitical updates, and inflation data to adjust your positions in major currency pairs accordingly.