Trump's Tariffs Shake Forex Markets; TSMC Faces Currency Challenges

In the past 24 hours, the forex market has experienced significant turbulence due to escalating trade tensions and corporate financial disclosures. Two pivotal developments have emerged: President Trump’s announcement of increased tariffs on European Union (EU) goods and Taiwan Semiconductor Manufacturing Company’s (TSMC) record-breaking profits tempered by currency concerns.

U.S. Tariffs on EU Goods Impact Forex Markets

President Donald Trump has intensified trade measures by imposing a 30% tariff on EU imports, effective August 1. This decision has introduced volatility in the forex markets, particularly affecting the euro and the U.S. dollar. The European Commission has extended its pause on retaliatory tariffs against the United States until August 1, aiming to negotiate a resolution. However, the ongoing trade dispute continues to pressure European exporters and bolster the dollar as a safe-haven currency. Source

Market Reactions and Currency Movements

The euro has faced downward pressure, slipping to 1.1675 against the dollar. This decline is attributed to the looming tariffs and the European Commission’s decision to extend its pause on retaliatory measures. Investors are gravitating towards the dollar, seeking stability amid the trade tensions. Additionally, rising U.S. Treasury yields, with the 10-year rate holding above 4.40%, have further supported the dollar’s strength. Futures traders are now pricing in just one 25 basis point Federal Reserve rate cut for the remainder of the year, diminishing the euro’s relative appeal. Source

TSMC’s Record Profits Amid Currency Challenges

In the corporate sphere, TSMC, the world’s leading contract chipmaker and primary supplier of advanced AI chips for companies like Nvidia and Apple, is expected to report a record-setting 52% increase in second-quarter profit, amounting to T$377.4 billion ($12.9 billion). This would mark the sixth consecutive quarter of profit growth. The surge is driven by robust global demand for AI-related technologies, with TSMC’s sales projected to grow by nearly 30% in 2025, outpacing the overall industry growth of 17% to 18%. However, challenges such as new U.S. tariffs under President Trump and significant appreciation of the Taiwan dollar could impact future performance. A 12% rise in the Taiwan dollar has already trimmed over 3 percentage points from TSMC’s gross margin, with each 1% appreciation affecting margins by 0.4 points. The company also announced a $100 billion U.S. investment, adding to $65 billion already committed for Arizona facilities. TSMC shares have risen modestly by 3.7% in 2025 after an 80% surge in the previous year, reflecting investor concerns over tariffs and currency volatility. TSMC is scheduled to release its Q2 earnings and provide Q3 guidance on Thursday. Source

Implications for the Forex Market

TSMC’s financial performance is closely watched by forex traders, as the company’s global operations and revenue streams are sensitive to currency fluctuations. The appreciation of the Taiwan dollar against the U.S. dollar has already impacted TSMC’s gross margins, highlighting the broader implications of currency movements on multinational corporations. As TSMC continues to navigate these challenges, its strategies and financial health will remain key indicators for forex market participants.

In conclusion, the forex market is currently navigating a complex landscape shaped by geopolitical trade policies and corporate financial developments. Traders and investors must stay vigilant, monitoring policy shifts and corporate earnings reports to make informed decisions in this dynamic environment.