Pound to Dollar Rate Off Highs, Trump Revives Universal Tariff Threat

Trump's latest tariff comments were made abroad AIr Force One. Official White House Photo by Tia Dufour

The Dollar has recovered from recent losses after President Donald Trump raised the spectre of a universal import tariff once again.

The Pound to Dollar has fallen to 1.2437 from Monday's multi-day high at 1.2523 after Trump said he wants to enact a universal import tariff that is "much bigger" than 2.5%.

"I have it in my mind what it’s going to be but I won’t be setting it yet, but it’ll be enough to protect our country," Trump told reporters aboard Air Force One on Monday night.

Currency analysts consider the universal tariff to be the most supportive tariff structure for the Dollar.

A universal tariff was promised in Trump's presidential campaign and was one reason why the Dollar rallied after his victory.

Since taking office, Trump has been more inclined to use the threat of tariffs as a bargaining chip, suggesting a targetted approach.

Falling odds of a universal tariff have helped currencies like the Euro and Pound Sterling recover against teh Dollar over recent days.

But Trump was asked on Monday to comment on reports that incoming Treasury Secretary Scott Bessent favoured starting with a global rate of 2.5%.

Trump said he didn’t think Bessent supported that and wouldn’t favour it himself. He said he wanted a rate "much bigger" than 2.5%.

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Risks for the Canadian Dollar and Peso were raised after Trump hinted he could also impose tariffs on automobiles from Canada and Mexico, countries he’s already threatened with 25% across-the-board tariffs as soon as February 01.

"As tariffs on other countries go up, taxes on American workers and businesses will come down and massive numbers of jobs and factories will come home," Trump told House Republicans at his Doral resort in Miami. "Remember, again, the word 'tariff.' We’re going to protect our people and our businesses, and we’re going to protect our country with tariffs."

It is clear Trump remains a steadfast believer in tariffs and they will come. Recent USD weakness could, therefore, look premature.

"With the more straightforward buy-the-rumour phase of the ‘tariff trade’ now behind us, there is some understandable handwringing around the longevity of the dollar trend," says Patrick R Locke, an analyst at JP Morgan.

"Tariffs delayed are not tariffs cancelled by any stretch," adds Locke, underpinning his view that bouts of USD weakness will be a "fade".