Markets were rocked by the Trump administration’s tariff policies.

Contrary to the expectations of many market participants, additional tariffs of 25% on Mexico and Canada and 10% on China were imposed at an extremely early date. The reason for the tariffs is said to be to reduce the inflow of fentanyl, but there is no clear goal line set to stop the tariffs, so we have to reconstruct our view of the market based on the assumption that the tariffs will be imposed. Last week, news of the 25% tariffs being applied to Mexico and Canada triggered a furious risk-off situation in the currency markets. The cross-yen fell, the Canadian dollar and Mexican peso sold off, and for some reason the altcoin group of crypto assets sold off sharply. Bitcoin dominance exceeded 60%.

However, just before the tariffs were applied, an agreement was reached with Mexico to postpone the tariffs for a month and a similar agreement was reached with Canada, sending the market sharply back to its pre-weekend levels and exhaustion. The Euro-Yen instantly strengthened by nearly one yen after the additional 10% tariffs on China were decided. For now, we will have to wait and see what the Trump administration has in store for us. What they really want to do is make a big move with a single headline, so the only trade idea I can come up with is to reverse the headline move rather than the other way around.

If more and more tariffs are imposed, inflation in the U.S. will rise and the dollar should naturally appreciate, but would you want to buy dollars in such a situation? Would you want to buy the dollar in such a situation? The next step is likely to be tariffs on Europe, so the downside for the Eurodollar and Euroyen could be significant. Of course, we have to take into account the possibility that the tariffs will be suddenly withdrawn, since we are dealing with President Trump, but it is likely to strengthen the flow of money into gold by process of elimination.

However, the BOJ is changing its stance (Governor Ueda stated in the Diet that the current situation is inflationary), and the LDP is now willing to accept a slight rise in interest rates to correct for the weakening yen, as the mood has changed in response to rising US prices. The LDP is now willing to accept a slight rise in interest rates in order to correct the yen’s weakness. In the near term, risk-off yen buying is likely to dominate the market.