Market reactions included an increase in the VIX index, indicating heightened uncertainty, a decrease in WTI oil prices due to global demand concerns, and a rise in gold prices, signifying a flight to safe assets amidst volatility.

These tariffs impose a 10% tax on imports and include a reciprocal component based on trade imbalances, marking the largest tariff increase since the Smoot-Hawley Tariff Act of 1930.

Following the announcement, the US dollar experienced a sharp depreciation, which contradicts the standard economic theory that suggests tariffs should strengthen the home currency.

In the 24 hours following the announcement, all G10 currencies appreciated against the dollar, while many emerging market currencies showed mixed responses, indicating a divergence in market reactions.

Specifically, the euro, yen, pound, and franc rose by approximately 1% to 2% against the dollar, while currencies like the Thai baht and South African rand depreciated slightly.

On April 2, 2025, the US government announced new tariffs on imports from 180 countries, a significant trade policy shift that President Trump referred to as 'Liberation Day.'

This depreciation was primarily driven by foreign portfolio rebalancing away from US equities, as foreign investors adjusted their asset holdings in response to the new tariffs.

The unusual response of the dollar suggests that perceptions regarding its safe-haven status may be evolving due to the current administration's trade policies.