Global markets are responding to President Trump’s announcement on February 1st about a 10% import tariff on US goods, which will increase to 25% on June 1st. This will impact countries including Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland. The European Stoxx futures have fallen by 1.3%, while the S&P futures are down 0.9%. These tariffs will stay in effect until the US completes its ‘full purchase of Greenland.’ Currencies affected by this news initially dropped, but the US dollar has seen some recent decline again after the ‘sell America’ trend resumed. Other factors, such as the appointment of the new Fed Chair and a potential Supreme Court decision related to global tariffs, could further weaken the dollar. The Swiss franc and yen have gained strength as investors seek safer options.

The Dollar’s Reaction to Tariffs

The dollar’s decline is tempered by the fact that tariffs won’t take effect until February, leaving time for possible negotiations. However, if Europe responds with tariffs on €93 billion worth of goods, as previously considered, the situation could escalate. President Macron is pushing for the EU to extend its anti-coercion measures beyond just trade tariffs. Reflecting on the Greenland tariff threat in late 2025, we saw sharp market shifts driven by headline news. The immediate response was a flight from risk, impacting European and US stock futures. This event warns us to brace for sudden geopolitical announcements, as it illustrates how markets might react to ongoing trade tensions. During that time, the dollar weakened, with the DXY index falling 1.2% in under a week. Investors showed they would sell US assets amid trade conflicts. This “sell America” tendency is crucial, indicating that short-dollar positions could be profitable when the US pursues aggressive trade policies. As of January 2026, with the US trade deficit expanding by 4% in the last quarter of 2025, new tariff threats could intensify this market response.

Safe Haven Currencies and Market Volatility

As anticipated, the Swiss franc emerged as the most dependable safe-haven currency during the 2025 scare. The USD/CHF pair fell nearly 2% in just three days, outperforming the Japanese yen. This experience reinforces the strategy of buying Swiss francs against the dollar or euro as a primary defense against European political risks. For derivative traders, the key lesson came from volatility trends, with the VIX index surging from a low of 15 to over 24 within two days. This underscores the benefit of holding long volatility positions, such as VIX calls or futures, as effective hedges. With implied volatility currently low, acquiring some inexpensive out-of-the-money options on the VIX is a smart strategy going forward. It’s essential to note how quickly the threat of retaliation from the European Union emerged. The EU’s anti-coercion instrument, which was nearly activated, shows that Europe is now actively engaged in these disputes. Given that the EU’s trade surplus with the US reached a record €210 billion in 2025, their ability to retaliate with tariffs is now more powerful than ever. Create your live VT Markets account and start trading now.

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