Published: 2025-02-13T19:10:01.000Z
USD flows: Reciprocal tariffs, apparently also against VAT
Senior Economist , North America
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The USD saw a bounce, temporarily erasing earlier losses as Trump’s tariff announcement arrived, with the biggest shock probably that those countries applying VAT will be considered as using tariffs.
Markets are volatile as they digest the news. Trump’s announcement that the EU lowered tariffs to 2.5% could have raised optimism on Europe avoiding tariffs had it not been for the comments on VAT, and Trump suggested other countries could avoid tariffs by lowering theirs. However, generally it looks like Trump is being more aggressive than many hoped, with Trump acknowledging that prices could go up in the short term, and a White House official suggesting tariffs will help balance the budget (they will have to large to even put a significant dent in the deficit). The tariffs will not be put in place immediately but Commerce Secretary Lutnick said they will be ready by April 1,