NEW YORK — The U.S. dollar slumped Friday as investors rushed out of the currency following President Donald Trump’s renewed tariff threats against the European Union, a move that stoked global trade concerns and sent ripples across foreign exchange markets.
Trump announced via social media that he would recommend imposing 50% tariffs on EU goods starting June 1, citing stalled negotiations and describing the bloc as “very difficult to deal with.” In a separate post, he escalated tensions further by threatening a 25% tariff on Apple iPhones not manufactured in the United States, as well as on Samsung and other smartphone makers.
The market reaction was swift. The greenback dropped 1% against the Japanese yen to 142.48, falling to a two-week low and booking a 2.2% decline for the week — its steepest drop against the yen since early April. Meanwhile, the euro surged 0.8% to $1.1363, reaching a two-week high and marking its strongest weekly performance in six weeks.
“The key theme that is weighing on the dollar right now is the loss of confidence in U.S. policy,” said Elias Haddad, senior markets strategist at Brown Brothers Harriman. “There’s an ongoing trade war and that’s leading countries to reassess their dependency on the U.S.”
The dollar index, which tracks the greenback’s value against a basket of major currencies, slid 0.8% to 99.09, hitting a three-week low. The index is down 1.9% for the week, its biggest percentage decline since early April.
The renewed tariff rhetoric spooked equity markets as well, with U.S. stocks falling in tandem with the dollar. Analysts noted the breakdown of the dollar’s traditional role as a safe haven amid domestic policy volatility.
“The dollar and stocks selling off in unison show that the greenback is no longer a hedge in the current climate,” said Jayati Bharadwaj, global FX strategist at TD Securities. “The risks we’re facing are U.S.-centric, and that has flipped the dollar’s relationship with equities.”
Treasury Secretary Scott Bessent defended Trump’s comments, saying they were in response to the EU’s slow pace in trade talks. He insisted the president views the bloc’s offers as inadequate for the United States.
The Japanese yen, in contrast, gained additional support from data showing that Japan’s core inflation rate rose at its fastest annual pace in more than two years in April. The report raised the likelihood of a Bank of Japan interest rate hike by year-end. Super-long Japanese government bonds hit record highs earlier this week, although yields eased slightly on Friday.
Investors are also weighing the impact of last week’s credit rating downgrade of U.S. sovereign debt by Moody’s, which cited the country’s ballooning $36 trillion debt and Trump’s tax proposal that could inflate it further. The tax bill passed narrowly in the Republican-controlled House and now moves to the Senate, where it faces an uphill battle amid heightened fiscal scrutiny.
In other currency moves, the British pound strengthened 0.9% against the dollar to $1.3533, touching its highest level in more than three years. The pound posted a 1% weekly gain — its strongest since mid-April.
As Trump’s aggressive trade stance reawakens fears of economic disruption and global retaliation, investors appear to be seeking shelter elsewhere, casting serious doubt over the dollar’s near-term outlook.
