USD at risk: Trump tariff strategy faces legal challenges, Goldman warns

USD strength could face headwinds as Goldman Sachs warns that Trump administration's tariff increases may be legally vulnerable, potentially affecting dollar positioning. The investment bank notes that approximately 8 percentage points of the 11pp rise in effective U.S. tariff rates this year rely on the International Emergency Economic Powers Act (IEEPA), which faces potential court challenges. While the administration is expected to pivot to alternative legal mechanisms if IEEPA-based tariffs are overturned, such uncertainty could create volatility in USD pairs. The protectionist trade policy has been a key driver of dollar strength in 2025, supporting USD against major peers. Any legal setbacks could trigger USD weakness, particularly against trade-sensitive currencies like EUR, CNH, and commodity dollars. Traders should monitor legal developments closely as court decisions could rapidly shift the dollar's fundamental outlook and reverse recent USD gains across the board.