NZD/USD price rebounds above $0.56 as markets focus on Trump China tariffs
NZD/USD recovers as U.S. delays tariffs on Canada
The NZD/USD pair is recovering from recent losses, rising to 0.5630 in early Asian trading on Tuesday as investors react to President Donald Trump’s decision to delay tariffs on Mexico and Canada. However, new U.S. tariffs on Chinese imports set to take effect later in the session could introduce fresh volatility, keeping traders on edge.
While the pause in U.S. tariffs on Canada and Mexico has provided some short-term relief, the focus remains on the U.S.-China trade war escalation and how it affects risk sentiment. If China’s retaliation escalates, safe-haven flows into the U.S. dollar could drive NZD/USD lower, potentially testing support near 0.5550. Conversely, any signs of trade de-escalation could provide support for the kiwi and push the pair toward 0.57.
NZD/USD price movement (Nov 2024 - Feb 2025) Source: TradingView.
Trump’s trade policies drive NZD/USD fluctuations
The New Zealand dollar initially strengthened following Trump’s announcement that he would pause planned tariffs on Canadian and Mexican imports after securing commitments from both nations to deploy 10,000 troops to the U.S. border to curb drug trafficking. This move alleviated immediate concerns about supply chain disruptions, improving market sentiment.
However, the focus now shifts to Trump’s 10% tariffs on Chinese goods, which are scheduled to be implemented at 05:00 GMT on Tuesday. Given New Zealand’s heavy reliance on trade with China, any further deterioration in U.S.-China relations could negatively impact the kiwi. If China retaliates with counter-tariffs, risk sentiment could shift sharply, boosting safe-haven demand for the U.S. dollar and weighing on NZD/USD.
China retaliates, RBNZ rate cut prospects weigh on the kiwi
Despite early gains, the New Zealand dollar weakened to 0.5590 as reports emerged that China would impose retaliatory tariffs on U.S. goods, escalating trade tensions. The Chinese finance ministry confirmed new tariffs of 15% on U.S. coal and LNG, alongside 10% duties on crude oil, farm equipment, and certain automobiles starting February 10. This announcement rattled investors, fueling renewed risk-off sentiment and limiting NZD/USD’s upside potential.
Meanwhile, traders are also weighing the Reserve Bank of New Zealand’s (RBNZ) dovish outlook, which continues to put pressure on the kiwi. Markets expect the RBNZ to cut rates by 50bps to 3.75% this month, with an anticipated policy rate bottom of 3.00% over the next year. Additionally, upcoming New Zealand Q4 unemployment data, scheduled for release on Wednesday, could provide further direction for the currency, especially after Q3 figures showed the highest jobless rate since 2020.
Previously discussed levels near 0.5600 remain critical, with the pair responding to broader trade policy developments. The RBNZ rate outlook and China’s next steps will be key factors shaping NZD/USD’s trajectory in the coming days.
