Trump's inauguration as President on Monday sparked market turbulence due to mixed signals on trade policy. While his initial speech suggested a softer stance on tariffs, later comments about potential 25% taxes on Mexican and Canadian imports, plus a possible 10% China tariff, rattled markets. Gold surged above $2,750/oz as uncertainty drove safe-haven demand.

Trump's First Days in Office: Tariff Ambiguity Fuels Market Fluctuations
Following Donald Trump's inauguration as the President of the United States on Monday, traders are assessing the early policy actions and statements of the new administration. While the new president swiftly signed numerous executive orders, his stance on tariff policy—one of the most anticipated issues—has left markets uncertain.
Tariffs were a cornerstone of Trump's economic policy during his campaign, and he had continued to issue tariff threats even before officially taking office. Traders eagerly watched the inaugural ceremony to see if Trump would take immediate action on tariffs.
However, Trump's first speech on Monday suggested that he intends to revisit tariff policies, easing global trade concerns and causing the U.S. dollar to experience its worst day against other currencies since November 2023. Yet, this sense of relief in the markets was short-lived.
Just hours after his initial speech, Trump made a series of off-the-cuff remarks, stating that he plans to impose a 25% tax on imports from Mexico and Canada in the coming weeks. He also mentioned considering a global tariff on goods from all other countries.
Furthermore, Trump reiterated that a 10% tariff on all imports from China was still on the table and could be implemented as early as February 1.
Markets reacted sharply to Trump's comments, with sentiment swinging like a rollercoaster. While the lower-than-expected 10% tariff on Chinese imports was less severe than the 60% rate he had mentioned during his campaign, it did little to ease concerns about a potential trade war. Traders braced for increased volatility.
Some market observers began to suggest that market volatility triggered by Trump's impromptu comments might become a regular feature of his presidency. While some analysts believe he will not take an aggressive stance on tariff policies, others expect higher tariffs, particularly on Chinese goods, and maintain predictions for a stronger U.S. dollar.
Economists at Goldman Sachs view Trump's decision not to impose tariffs on his inauguration day as the most positive signal in the current outlook. Meanwhile, strategists at Societe Generale argue that while the dollar may remain at its current high levels, a significant further rally seems unlikely.
On the other hand, ING and Nomura strategists consider the recent drop in U.S. Treasury yields a temporary pause and expect the upward trend to continue.
A survey conducted by Bank of America revealed that traders are increasingly betting on Trump taking a softer stance on global trade than initially feared. Nevertheless, fund managers remain cautious and prefer to stay prepared for further announcements on tariffs and immigration.
In conclusion, Trump's early rhetoric continues to leave markets engulfed in uncertainty. Questions remain about the scope and implementation of his "America First" policies, closely monitored by the markets.
While the initial relief has slightly weakened the U.S. dollar against its rivals, persistent uncertainties could support safe-haven demand for the dollar, potentially limiting its losses—at least until Trump makes a definitive move on tariffs.
Trump's Policy Uncertainty Drives Gold to Pre-Election Levels
As traders focused on potential announcements regarding Trump's tariff policies, gold returned to its pre-presidential election levels, trading above $2,750 per ounce on Tuesday.
The new U.S. president's contradictory remarks on tariffs during his initial days in office were interpreted by markets as a possible sign of a softer stance on trade policy. As a result, while concerns about higher inflation persist, swap traders increased the odds of multiple Fed rate cuts this year to nearly 70%—up from 46% on Friday. Lower interest rates are typically supportive of non-yielding assets like gold.
Additionally, uncertainty surrounding Trump's policies continues to weigh on global markets, bolstering demand for safe-haven assets.
However, traders remain cautious as risks persist regarding Trump's expected tax policies and the growing U.S. fiscal deficit, which could lead to higher inflation and limit the Fed's room for further rate cuts. As long as inflation remains a significant concern, it could hinder gold's potential for further gains.
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