Against the backdrop of the recent 25% tariffs imposed by the United States on Canada, China and Mexico, the U.S. Dollars has experienced weakness as opposed to a usual surge in the dollar during previous tariffs.

On Tuesday, the global stock market experienced a decline as President Donald Trump implemented his most recent tariffs, which targeted Canada, Mexico, and China.

Amid growing trade tensions between the United States and its international partners, the dollar index, which compares the greenback to a basket of key currencies, dropped by around 1% and hit a three-month low.

According to Stephen Miran, Trump’s nominee to chair the Council of Economic Advisers, the tariffs implemented against China during his inaugural term served to undermine the renminbi, China’s currency, thereby mitigating the effects of the new tariffs on consumer prices.

The dollar surged after the 2024 election, partly due to expectations tied to Trump’s tariff plans, even as many Wall Street figures cautioned that investors should take Trump “seriously but not literally” when it came to his tariff threats.

Now, according to some, the dollar’s weakness so far this week could be cause for alarm.

“The dollar going up on tariff news isn’t scary,” said Lily Francus, chief investment officer of Novi Loren and former quantitative strategy director at Moody’s, in a post from earlier this year that she shared again on X. “The day it goes down on tariff news will be.”

George Saravelos, global head of foreign-exchange research at Deutsche Bank, said there could be several reasons for the dollar’s reaction. But one stood out to him as particularly troubling: the possibility that the greenback could be losing its safe-haven status.

“There are times to be dismissive of the market reaction, but not today,” Saravelos said in commentary shared with MarketWatch.

Further explanations were that, outflows from U.S. stocks in favor of European and Chinese shares may have dented demand for the dollar from foreign investors.