NZD/USD plunges to near 0.5660 as US Trump tariffs loom large

• NZD/USD dives to near 0.5660 amid fears of fresh tariffs by the US on Wednesday.
• The Chinese economy is expected to face a significant burden of Trump's tariffs for holding the highest trade surplus among US trading partners.
• Goldman Sachs sees higher chances of a recession amid Trump tariff jitters.

The NZD/USD pair is down almost 1% to near 0.5660 during North American trading hours on Monday. The Kiwi pair plunges as the appeal of antipodeans has slumped, given their strong trade relations with China.

The New Zealand Dollar (NZD) plummeted as investors rushed to a safe haven ahead of the so-called "Liberation Day" on Wednesday, when United States (US) President Donald Trump will announce reciprocal tariffs. Investors expect China to face significant tariffs, given that it carries the highest trade surplus against the US among all its trading allies.

On Sunday, Trump confirmed that tariffs would hit all of its trading partners. Such a scenario will be unfavorable for global economic growth

Trump's tariffs will also have a negative impact on the US economy. Financial market participants expect Trump's economic policies could also lead to a recession. Analysts at Goldman Sachs have revised chances for a recession to 35% from their prior expectations of 20%. Their upward revision for recession risks was based on a sharp "deterioration in household and business confidence", and statements from the White House officials indicating "greater willingness to tolerate near-term economic weakness" in pursuit of their policies.

On the economic front, investors will focus on the US S&P and ISM Manufacturing PMI data for March, which will be released on Tuesday. The US ISM Manufacturing PMI is estimated to come in at 49.5, lower from 50.3 seen in February. A figure below the 50.0 threshold is considered as contraction in economic activities.