Dollar weakens after Trump tariffs struck down

NEW YORK (Reuters) – The dollar weakened on Monday as traders evaluated U.S. tariff policies after the U.S. Supreme Court on Friday struck down President Donald Trump’s tariffs, while traders also watched rising tensions with Iran, which is in talks with the United States over a nuclear treaty.

The justices upheld a lower court’s decision that Trump’s use of a 1977 emergency law exceeded his authority. Trump has responded that he will find alternative ways to collect the levies.

“The biggest issue is that there’s uncertainty now. And the way the market is discounting that uncertainty is also a little bit unknown,” said Sarah Ying, head of FX strategy at CIBC Capital Markets in Toronto.

The euro gained 0.09% to $1.1791 and the Japanese yen strengthened 0.29% against the greenback to 154.63 per dollar.

“There is a big debate amongst the market on whether more tariffs are better or worse for the greenback. And you can argue both ways,” said Ying.

For example, more aggressive tariffs may increase inflation and reduce the odds of more Fed cuts, which would lead to a higher dollar. On the other hand, more uncertainty raises the risk of de-dollarization, which would be negative for the currency, Ying said.

Trump said on Saturday he would raise a temporary tariff from 10% to 15% on U.S. imports from all countries, the maximum level allowed under the law. The new levies are grounded in an untested law, Section 122, that allows tariffs up to 15% but requires congressional approval to extend them beyond 150 days.

Trump said he would use the 150-day period to work on issuing other “legally permissible” tariffs. In a social media post on Monday, he also pointed to the potential use of licenses to pressure countries.

The European Parliament decided on Monday to postpone a vote on the European Union’s trade deal with the United States due to the new import tax.

U.S. Treasury Secretary Scott Bessent said on Friday he believed every country was going to honor the trade agreements made with the Trump administration over the last year.

There is also uncertainty over whether companies that paid tariffs will be able to obtain refunds.

Thousands of companies around the world have filed lawsuits against Trump’s sweeping tariffs, and it may now take years of litigation to determine whether they will be refunded.

The issue comes as Federal Reserve policymakers continue to express concerns about still-elevated inflation.

The U.S. central bank is expected to keep rates on hold until at least June.

Fed Governor Christopher Waller said on Monday he was open to leaving interest rates on hold at the Fed’s March meeting if upcoming February jobs data indicates the U.S. labor market has “pivoted to a more solid footing” after a weak 2025.

Sterling strengthened 0.04% to $1.3487.

Former British ambassador to the U.S. Peter Mandelson has been arrested by London police on suspicion of misconduct in public office, following revelations over his ties to convicted sex offender Jeffrey Epstein.

Traders are also focused on rising geopolitical tensions.

The State Department is pulling out non-essential government personnel and their eligible family members from the U.S. embassy in Beirut, a senior State Department official said on Monday, amid growing concerns about the risk of a military conflict with Iran.

The Mexican peso also weakened after one of Mexico’s most notorious drug lords, Nemesio Oseguera, or “El Mencho,” was killed in a military raid on Sunday, sparking widespread retaliatory violence.

The Mexican peso fell 0.64% versus the dollar to 17.263.

In cryptocurrencies, bitcoin fell 5.11% to $64,151.

(Reporting by Karen Brettell; Additional reporting by Niket Nishant in London and Tom Westbrook, Editing by Franklin Paul and Nick Zieminski)