The US dollar starts the week with modest gains amid Trump's tariff threats on Colombia

The US dollar began the week with slight gains after President Donald Trump threatened to impose tariffs on Colombia for refusing to allow deportation flights carrying migrants to land in the country, according to Bloomberg.

Following its worst week in 14 months, the US currency rebounded, rising approximately 0.2% against the euro and slightly less against the Australian and New Zealand dollars.

Earlier, the dollar had weakened as traders perceived more rhetoric than action regarding tariffs during Trump’s first week in office. However, Trump ordered emergency tariffs of 25% on all Colombian goods entering the US, with plans to raise them to 50% within a week.

Trump warns of further tariffs and sanctions

Trump’s tariff threats extend to emergency banking and financial sanctions on Colombia, escalating tensions over the deportation issue.

Traders remain cautiously optimistic, noting that Trump’s initial days brought threats but not the sweeping new tariffs he had promised during his campaign.

“Actions speak louder than words,” Dan Sikov, Chief Strategist for Macroeconomics, told Bloomberg. “The situation with Colombia demonstrates how easily tariffs can be used as a negotiation tool.”

He added, “There will be further developments on the tariff front, and the US dollar’s rally is far from over.”

Market reactions

The Mexican peso fell 0.3% in early trading, reflecting dampened sentiment toward Latin American assets. Last week, however, Eastern European and Latin American currencies enjoyed gains during the best week for emerging markets since July 2023.