Fears of a brewing trade war between the United States and the European Union hit currency markets on Tuesday, pushing the dollar sharply lower as investors digested fresh talk of a so called European “trade bazooka” and a wider escalation cycle.

The move is landing at the same time as U.S. equity futures slid about 1.5%, according to the Financial Times, reinforcing the sense that markets are not applauding this kind of trade politics, they are pricing it as self harm that is likely to hit the U.S. economy hard.

Measured in euros, the dollar’s drop is now close to 12% since last New Year’s Eve, underlining how quickly confidence can leak out of a currency when policy risk starts to look like the main export.

Love the Trammps.