The U.S. Dollar Index (DXY) is poised for potential appreciation as the U.S. plans to impose new tariffs on imports from Mexico, Canada, and China, according to Morgan Stanley's latest analysis. The report, titled "Tariffs Before Tax Cuts," suggests that the implementation of tariffs could lead to tighter financial conditions, with the USD likely to rise more durably than U.S. Treasury yields. "A volatile response in markets may extend beyond Monday if the US implements tariffs on Tuesday," Morgan Stanley strategists note. The report outlines three scenarios for tariff implementation, with the broadest and most enduring tariffs expected to significantly impact nominal GDP growth, thereby increasing the attractiveness of U.S. Treasuries. Additionally, the strategists highlight that the USD could appreciate broadly in the short term, particularly against CAD and MXN, due to the asymmetric risk profiles skewing negative for these currencies versus the USD.