(Bloomberg) -- The dollar slid Friday, extending this year’s losses to over 7%, after President Donald Trump threatened steep new tariffs of the European Union and revived investor concerns over global trade policy.

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The Bloomberg Dollar Spot Index fell as much as 0.6%, approaching the lowest level since December 2023. Trump floated a 50% tariff on EU goods, citing lack of progress in discussions. That curbed the euro’s advance against the greenback, which is already under strain from fiscal and policy uncertainty.

“Large increase in tariffs on US imports from the EU once again brings forward the potential for recession risks in the US alongside higher policy and economic uncertainty,” said Aroop Chatterjee, a strategist at Wells Fargo in New York.

The dollar’s renewed drop sent ripples through the $7.5 trillion-a-day currency market. While the Trump administration recently struck deals with some countries, the broader uncertainty has dented the greenback’s safe-haven appeal. Inflation expectations have edged up, while havens like the Swiss franc, yen and euro have benefitted.

The euro traded 0.5% stronger than the greenback Friday morning in New York; it was up as much as 0.8% before Trump’s threat. The yen jumped as much as 1.1% to trade at 142.45 per US dollar Friday.

“The jitters with respect to the US budget suggest that the market is continuing to re-think the US exceptionalism trade,” Jane Foley, a strategist in London for Rabobank. “Whether it be budget, inflation or growth concerns, investors are more wary of US assets and that is continuing to weigh on the dollar.”

JPMorgan Asset Management said the dollar is entering its multi-year weakening trend as international investors are curtailing their overweight positions in the US assets. The market has been growing increasing bearish in positioning against the dollar as the tariff war unraveled this year.

Speculative traders — including hedge funds, asset managers and others — hold some $16.5 billion worth of positions tied to the dollar weakening, around the most since September, according to Commodity Futures Trading Commission data for the week ending May 13.

“Diversification flows out of the dollar will continue, albeit at a slower pace as the damage to the currency has been done,” said strategists including David Forrester at Credit Agricole. “Investors are questioning Trump’s ability to get a fiscal stimulus through Congress following the latest sovereign ratings downgrade. The passing of the bill threatens to aggravate further investors’ fiscal sustainability concerns.”

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Trump also threatened a 25% levy on Apple Inc. if the tech giant doesn’t move iPhone manufacturing to the US, sending the stock price down and added to the growing sense of policy unpredictability.

“Fiscal concerns have triggered renewed dollar weakness,” wrote a Bank of America team including Michalis Rousakis and Claudio Piron. “Negative risk premium continues to be embedded into the dollar, as tariff uncertainty has evolved from a cyclical to a structural story.”

--With assistance from Carter Johnson.

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