Trump targets Canada and 22 others in new tariff blitz

Dollar climbs as Trump escalates tariffs against Canada

The US dollar surged across major peers on Monday after President Donald Trump announced a sweeping 35% tariff on Canadian imports, citing national security, retaliatory trade measures, and the ongoing fentanyl crisis. The decision marked a new high in Trump’s trade war rhetoric, with the president threatening even broader “blanket” tariffs of 15–20% on countries not already subject to formal duties.

The move against Canada followed earlier tariff letters sent to 22 nations, with rates ranging from 20% to 50%. Traders reacted swiftly, pushing the greenback higher amid renewed risk aversion and expectations of further global supply chain disruptions. The aggressive trade stance has reintroduced inflation and recession risk into market calculations, especially as it coincides with signs of slowing growth in several major economies.

UK economy contracts for a second straight month

In the UK, May GDP data dealt another blow to the growth outlook. The economy contracted 0.1% month-on-month, following a 0.3% decline in April — a back-to-back drop that now points to the likelihood of a second-quarter contraction. Analysts had expected a modest recovery in May, but persistent weakness in manufacturing, particularly in the pharmaceutical and transport equipment sectors, dragged down output.

Construction activity also slumped, compounding the decline, though the services sector managed a slight increase. The weak data will put pressure on the Bank of England, which has remained cautious amid inflationary concerns but now faces rising risks to overall economic activity. A technical recession remains a real threat if June data fails to surprise on the upside.

Fed debate intensifies: Waller calls for July cut, Daly urges patience

Federal Reserve Governor Christopher Waller offered one of the strongest endorsements yet for near-term easing, arguing that inflation has slowed enough to justify a rate cut as early as this month. Speaking in Dallas, Waller said the current policy rate is “too tight,” especially as inflation moves closer to the Fed’s 2% goal. His stance diverges from the current majority at the FOMC but highlights growing internal debate.

Importantly, Waller dismissed suggestions that the latest wave of Trump’s tariffs should delay action, arguing their effects on broad inflation remain limited. “If inflation is coming down, you don’t need to be as restrictive anymore,” he emphasized. He also made clear that his call was rooted in economic evidence, not politics.

In contrast, San Francisco Fed President Mary Daly urged a more measured approach. While she agreed that two cuts in 2025 are now the base case, she emphasized the importance of waiting for clearer signals. Daly cautioned against acting too late, warning that “waiting for persistent inflation could leave us behind,” yet still preferred a move in the fall over immediate easing.