• AUD/USD plunges to one-month lows after Trump threatens a “massive increase” in tariffs on Chinese imports.
• Australia’s close trade ties with China amplify downside pressure on the Aussie amid renewed trade tensions.
• US government shutdown enters day 10, with Budget Director Vought confirming federal layoffs have begun.

The Australian Dollar (AUD) slumps against the US Dollar (USD) on Friday, with AUD/USD plunging to over one-month lows after US President Donald Trump threatened a “massive increase” in tariffs on Chinese imports, reigniting fears of a renewed trade war between the world’s two largest economies.

Given Australia’s close trade ties with China, the comments weighed heavily on the Aussie as traders trimmed exposure to risk-sensitive currencies. At the time of writing, AUD/USD trades around 0.6484, down nearly 1.0% on the day and on track to post a weekly loss.

At the same time, the Greenback also fell against its major counterparts, as Trump’s familiar trade-war theatrics once again cast a negative shadow over the United States (US) economic outlook and dented sentiment toward US assets. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, snapped a four-day winning streak and eased from a two-month high, down 0.38% to trade around 99.00.

In his post on Truth Social, Trump accused China of becoming “very hostile” and claimed Beijing had sent letters to multiple countries outlining plans to impose export controls on rare-earth elements and other critical materials, describing the move as an attempt to “clog the markets.”

He warned that the United States is considering “a massive increase of tariffs on Chinese products” as a countermeasure and suggested that a planned meeting with Chinese President Xi Jinping at the upcoming APEC summit might no longer take place.

From a broader perspective, the latest developments come at a delicate time for global markets already contending with a prolonged US government shutdown. The impasse in Washington has delayed key data releases and fueled uncertainty over federal spending. Earlier today, Trump’s Budget Director Russell Vought posted on X that “the RIFs have begun,” confirming that layoffs of federal workers are now underway as the shutdown stretches into its tenth day.