Euro rose in European trade on Monday against a basket of major rivals, resuming gains after a two-day hiatus and moving once more towards seven-month highs as markets assess the flexibility of Donald Trump’s trade stance. 

After the US imposed new tariffs on EU imports, European authorities started working on a batch of emergency measures to boost the most affected sectors and potentially impose counter tariffs on US products.

The Price

The EUR/USD price rose 0.7% today to $1.0982, with a session-low at $1.0901.

The euro fell 0.5% on Monday against the dollar on profit-taking away from seven-month highs at $1.1145.

Trump’s Flexibility 

Despite Trump’s assertion that the recently imposed tariffs are permanent, he somewhat kept the door open for modifications.

In new statements, Trump said that tariffs on Chinese products could be permanent, however, he said the US is looking for an agreement.

As for the EU, Trump believes that shrinking the trade deficit with the EU is possible through bolstering US energy exports to the eurozone. 

Otherwise, US Treasury Secretary Scott Bessent said Trump has conducted talks on tariffs with Japanese Prime Minister Shigeru Ishiba on Monday.

Bessent said that nearly 70 countries contacted the US administration to discuss the new tariffs, expressing hopes that negotiations with trade partners could lead to lower tariffs.

European Preparation

US tariffs on EU products were more aggressive than expected, with Trump imposing 20% tariffs on all EU imports.

European Commission President Ursula Von Der lyne described the tariffs as a pain hit to the global economy, and asserted the EU will issue countermeasures if negotiations with Washington failed.

She said the EU offered a zero for zero deal with the US to remove all tariffs on all sides and avoid an all out trade war.

The Japanese yen rose in Asian trade on Tuesday against major rivals, resuming its gains against the dollar after a two-day hiatus and moving once more towards a six-month high, as investors shun risks amid mounting US-China trade tensions. 

The yen is also underpinned by current weakness in US 10-year treasury yields, with markets now waiting for the Federal Reserve’s meeting minutes tomorrow to gather more clues on the future of US interest rates.

The Price

The USD/JPY fell 0.4% today to 147.25 yen per dollar, with a session-high at 148.12.

The yen lost 0.6% against the dollar yesterday on profit-taking away from a six-month high at 144.55, while US yields rebounded.

Trade Tensions

The White House quickly negated a report that alleges Trump is considering a 90-day hold on all tariffs except the China tariff, calling it “fake news”. 

Trump escalated the tension with China and threatened an even bigger 50% tariff on Chinese imports if Beijing insisted on its retaliatory tariffs on US products. 

Beijing vowed to “fight till the end” and asserted it won’t bow to US “blackmail”.

Otherwise, US business leaders started to talk publicly about the damage being done to the market because of the global trade war, with JPMorgan CEO Jamie Damon warning from inflation and slower growth.

Trade Negotiations 

US tariffs on Japanese imports were more aggressive than expected and amounted to 24% on all Japanese imports.

Washington agreed to engage with Tokyo and negotiate a trade and mutually acceptable trade settlement. 

Japanese Rates

As risks facing the Japanese economy mounted, traders cut the odds of another Bank of Japan interest rate hike this year to nearly zero.

US Yields

US 10-year treasury yields tumbled by 1.4% on Tuesday, resuming losses and approaching six-month lows once more, in turn pressuring the greenback. 

Chicago Fed Governor Austin Goolsbey said that while corporations are concerned about tariffs, the central bank needs to look at hard data in its actual responses. 

Sigar, cacao, and coffee prices fell on Monday amid global recession concerns, which hurt the prices of most assets and commodities as the trade wars erupted. 

China announced that new 34% tariffs on all US imports will go into effect on April 10, in response to Trump's 54% tariff on Chinese products.

US President Donald Trump announced historic tariffs on most world countries last week, starting with a 10% base tariff and more for specific countries.

Following Wall Street's severe decline last week, Trump defended the new tariffs as important medicine to rebalance the economy, adding he's not concerned about the stock losses so far.

Trump threatened China with an additional 50% tariff if they implemented their retaliatory 34% tariffs on US products. 

On trading, crude sugar prices settled at $18.81 a pound, paring the losses after plumbing a month low.

Cacao futures fell 5% at the London Exchange to 6023 pound per ton, while New York futures fell 2.65% to $8286 a ton.

Arabica coffee futures slid 3.8% to $3.52 a pound, while Robusta coffee shed 5.13% to $4850 a ton.

The US is the world’s top coffee and chocolate consumer, and one of the biggest sugar consumers worldwide. 

Oil prices fell on Monday and expanded the losses as the trade war erupted and threatened the global economy with a recession.

Goldman Sachs raised the odds of a US recession this year to 45% from 35% in previous estimates. 

Goldman Sachs’ analysts reduced their estimates for Brent prices this year by $4 to $58, while reducing the estimate for US crude prices to $55.

On trading, Brent June futures fell 2.1%, or $1.37 to $64.21 a barrel.

US crude futures due in May shed 2.1%, or $1.29 to $60.7 a barrel.