- Gold rallies near 1% on Tuesday after US President Trump said China, Mexico and Canada are too late in avoiding tariffs hitting this Tuesday.
- Canada set to impose 25% retaliatory tariffs from Tuesday, while China is set to slap 15% levies on US agricultural goods from March 10.
- US yields tick lower again on Tuesday, hitting a near 5-month low at 4.11%.
Gold’s price (XAU/USD) edges higher and trades around $2,915 at the time of writing on Tuesday after surging over 1% the prior day and set to surge another 1% this Tuesday. The recent upsurge came in after United States (US) President Donald Trump confirmed on Monday that tariffs for Canada, Mexico and China were underway. Markets were still doubting on Monday if President Trump would still allow an extension to tariffs implementation based on the efforts the countries were making to meet the demands of the Trump administration. Little too late, it seemed, with President Trump going ahead with imposing the committed tariffs starting on Tuesday.
Meanwhile, Canada and China have already pushed back on imposing unilateral tariffs from the US. A statement released by Canadian prime minister Justin Trudeau’s office confirmed that Canada will impose retaliatory tariffs on US imports from Tuesday if US tariffs go into effect. “Canada will start with 25% tariffs on US imports worth C$30 billion from Tuesday,” read the statement, while tariffs on other C$125 billion of products will come into effect in 21 days.
On the other hand, China’s Commerce Ministry announced early Tuesday that it would slap additional tariffs of up to 15% on imports of key farm products, including chicken, pork, soy and beef from the US. The Ministry said that the tariffs announced will take effect from March 10..
Amidst this tit-for-tat trade war, US yields are rolling off again. The US 10-year benchmark hit 4.11% on the downside in early Asian trading on Tuesday. A nearly five-month low, going back to levels not seen since mid-October.
Daily digest market movers: Surge back into safe havens
- On the geopolitical front, a senior defense official said the US was pausing all military aid to Ukraine, Bloomberg reports.
- After Monday’s turn of events, the CME Fedwatch tool is seeing the market’s cry for a Federal Reserve (Fed) interest rate cut by June getting even bigger. The odds currently stand at 85.6%, with a minor 14.4% chance for rates to remain unchanged.
- A string of recent US data showing resurgent inflation and slowing activity is stoking fears the world’s biggest economy could be heading toward a period of stagflation, Reuters reports.
Technical Analysis: That went quick
Bullion extends its Monday’s gains at the start of the European trading session on Tuesday. Ranges have become tighter for the daily Pivot Point levels, confirming the current indecision among investors after last week’s decline. Watch out for a continuation in any direction. However, uncertainty about a tit-for-tat trade war will see Gold being supported.
The daily Pivot Point at $2,879 and the daily R1 resistance at $2,903 are currently providing support to bounce off from and attempt to push Bullion higher. In case Gold has enough oomph to continue higher, the daily R2 resistance at $2,917 will possibly be the final cap on Tuesday ahead of the all-time high of $2,956 reached on February 24.
On the downside, apart from the abovementioned Pivot Point and the R1 resistance levels, the S1 support at $2,866 converges with Thursday’s low. That will be the vital support for this Tuesday. If Bullion bulls want to avoid another leg lower, that level must hold. Further down, the daily S2 support at $2,842 should be able to catch any additional downside pressure.
XAU/USD: Daily Chart
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
Source: https://www.fxstreet.com/news/gold-props-up-gains-after-tit-for-tat-trade-war-emerges-202503040939