US Treasury Secretary Scott Bessent announced that the highest tariffs will be disclosed on Wednesday, with possibilities for countries to reduce them later. In a Fox Business interview, he mentioned the “Dirty 15,” referring to the 15% of countries responsible for a large portion of US trade while imposing high tariffs on US imports.
The US Dollar Index (DXY) was at 104.18, down 0.03%. Tariffs are customs duties aimed at helping local producers by giving them a price advantage over imported goods.
How tariffs differ from taxes
Tariffs are different from taxes, being prepaid at the port, while taxes are paid at purchase. Economists have differing views on tariffs; some see them as essential for domestic protection, while others worry they may increase prices and lead to trade wars.
Donald Trump plans to leverage tariffs during the 2024 presidential campaign to bolster the US economy. In 2024, Mexico, China, and Canada made up 42% of total US imports, with Mexico being the top exporter at $466.6 billion. Trump intends to use tariff revenue to reduce personal income taxes.
Bessent’s confirmation of new, elevated tariffs adds a layer of clarity to the US’s current trade approach. With details expected mid-week, the signal is clear: Washington is leaning hard into trade as a policy tool. The mention of the “Dirty 15” implies a targeted strategy, one where the focus isn’t broad-stroke but instead pinpointed at countries both heavily engaged in US trade and maintaining protective barriers on their end. This list, though it may sound informal, indicates a priority ranking in future trade talks or retaliatory measures.
The slight dip in the US Dollar Index to 104.18 may seem minor but speaks to how markets are responding to the initial announcement. A weaker dollar in this context hints that traders see either a forthcoming drag on global trade or anticipated inflationary effects. Let’s not overlook that tariffs, by nature, raise input costs. And while they provide a relative boost to domestic producers by curbing competition, they also contribute to higher end-user prices, a trade-off that traders have to price into derivatives, especially in sectors sensitive to imports.
Market volatility and strategic adjustments
We need to be tight with positioning now. Tariff implementation adds volatility – not just to goods pricing but across currency trades, particularly where supply chains are globally dispersed. While Mexico, China and Canada accounted for nearly half of all US imports last year, Mexico landed at the top, meaning any preferential or punitive action will disproportionately impact peso forecasts, continental freight data and related swap markets.
Trump, leaning into tariffs as a campaign hallmark, adds political weight to what might otherwise be viewed as a short-term economic lever. By pledging to offset tariff revenue through reductions in personal income taxes, he is betting that domestic demand—and consumer sentiment—can be protected even as import costs rise. Whether this tax-offset idea gains traction or remains aspirational is uncertain, but it does open up potential shifts in index-linked products, especially those priced with consumption taxes in mind.
On our end, volatility products need to be reassessed with fresh positioning, especially in equity sectors directly tied to international sourcing—electronics, automotive, semiconductors. With tariffs, producers may rush orders ahead of enforcement dates; we should expect choppier intraday activity and leverage that accordingly. Another point: FX traders should monitor forward guidance from the Fed. Any dovish tilt in the shadow of rising import prices could create misalignment between rate expectations and inflation markers, particularly in the short end.
While opinions on tariffs vary among economists, the market moves based on implementation, not consensus. There’s no time to wait for academic validation when assets will reprice on Wednesday. Adjust accordingly.
