- According to recent trades, the British Pound has ignored US President Donald Trump’s threats to impose tariffs on countries that impose value-added taxes and appears set to achieve another weekly gain against the dollar and euro.
- At the end of last week, Trump outlined his plans to impose “reciprocal” tariffs on goods from countries that impose tariffs on the United States starting in April.
- Consequently, the bullish rebound of the GBP/USD pair extended to the resistance level of 1.2630, the pair’s highest level in two months, before settling around 1.2590 at the beginning of this week.
The Fate of US Tariffs
Recently, the US president surprised observers by saying he would impose tariffs on countries that impose sales taxes such as value-added tax, which includes Britain. He argued that the idea of VAT is ridiculous and confirms an agenda of punishing everyone, whether allies or enemies, to increase revenue for the United States. The random approach creates a great deal of uncertainty in the financial markets as it becomes difficult to predict where tariffs will fall and to what extent. This makes it difficult for other countries to respond.
Overall, it has become clear that forex markets are losing interest fast: the US dollar fell 1 percent last week and is heading for its fourth weekly decline in 2025. According to market experts, the law of diminishing returns appears to be at play as headlines about tariffs seem less provocative to the forex market. Overall, the pound is facing the threat of an expanded US tariff regime aimed at addressing stifling corporate rules that affect US companies. We reported that Howard Lutnick, the incoming US Commerce Secretary, will seek to impose tariffs on countries with onerous environmental, social and governance rules, which he says penalize US companies.
Now, Trump believes that VAT also punishes American companies. He told reporters at the White House, “We’re going to call it a tariff.”
Britain has imposed VAT since 1973 when it joined what would later become the European Union. For its part, the United States has pledged to deal with “each country individually. In almost all cases, they charge us much higher tariffs than we charge them but those days are over.” For its part, the American Taxpayer Foundation, a right-wing think tank, said last Thursday that VAT is “not a tariff” and is “commercially neutral.” “Historical evidence and recent studies show that tariffs are taxes that raise prices and reduce the quantities of goods and services available to American businesses and consumers, leading to lower incomes, reduced employment, and lower economic output.”
Trading Tips:
We still recommend selling the GBP/USD from any upward level but without risking the trading account from any sudden price reversals by activating take-profit and stop-loss orders.
Trump’s Goal of Tariffs
Trump says his reciprocal tariffs are aimed at restoring balance to global trade dynamics in favour of the United States. Analysts point out that Britain already has a balanced trade in goods with the United States, which would technically make Britain a low-priority target for Trump. But targeting VAT, he says, is not about global trade but about exercising American economic power and increasing revenue. On this basis, Britain will not escape by virtue of its favourable trade balance.
Technical Analysis for the GBP/USD pair today:
Keep in mind that the GBP/USD pair may remain relatively around its recent gains until the financial markets and investors react to the US and UK economic releases led by the announcement of the minutes of the last US Federal Reserve meeting. The success of the bulls in moving towards the resistance levels of 1.2670 and 1.2800 strengthens the ascending channel forming on the daily chart above, which may eventually lead to a move towards the psychological resistance of 1.3000. Conversely, and in the same time frame, the bears broke the support level of 1.2380, threatening the current upward rebound and a return to the broader bearish path.
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