After a slight reprieve Tuesday, fears of a global trade war resumed last night with the news of pro-free trade Gary Cohn’s resignation from the White House and more tariff threats from the Trump team.

Cohn resignation spikes trade-war fear

European and Asian stock markets dropped overnight, and the dollar slipped against the euro and the Japanese yen as trade talk toughened.

White House economic advisor Gary Cohn’s resignation after refusing to back Trump’s tariff plan means financial institutions have fewer allies inside the White House and could clear the path for more protectionist measures.

The Trump administration has already talked about imposing tariffs on steel and aluminum imports – something the European Union and many Republicans are speaking out against – but now it is looking to clamp down on a range of Chinese imports as a way to punish the country for alleged intellectual property theft.

China said it would “take necessary measures” if its interests are harmed. The E.U. has already threatened to impose tariffs on items like motorcycles and bourbon produced in Republican-held states, but a more official retaliatory plan will be revealed later Wednesday.

The EUR/USD pair is holding above 1.24 due to a weakened dollar and little on the Eurozone economic front today. The European Central Bank is expected to hold interest rates the same during its announcement Thursday, but it could discuss a way to end quantitative easing.

Better-than-expected U.S. ADP employment numbers out Wednesday morning gave a brief lift to the USD/JPY pair into the 106 range before falling back below the mark. ADP said the U.S. added 235,000 jobs in February, however, the news was largely overshadowed by trade concerns. The numbers might indicate that Friday’s nonfarm payroll numbers will be strong as well.

Bank of Canada statement eyed

The big economic event for the day is the Bank of Canada’s interest rate announcement later this morning. While BoC isn’t expected to change the rate, it could take the time to speak out against the trade tariffs thrown around by the Trump administration.

Canada, the United States’ largest trade partner, is focused on the path forward for NAFTA. Tariffs on steel and aluminum would be damaging enough to the economy that the BoC would have to rethink its current monetary policy.

USD/CAD was trading just above 1.26 before the BoC announcement. Trade deficit numbers released Wednesday morning from both countries caused little change for the pair. The Canadian trade deficit narrowed to $1.91 billion in January and U.S. trade deficit widened to $56.6 billion in January.

Brexit trade demands squashed

GBP/USD is trading down around 1.389 on news that the E.U. is rejecting Theresa May’s vision for a post-Brexit trade deal.

According to a release from his office Tuesday, U.K. Chancellor of the Exchequer Philip Hammond will insist in a speech Wednesday that a post-Brexit trade deal must include financial services access to the single market.

Unfortunately for Hammond, the E.U. has already indicated that a post-Brexit deal would only allow limited access for British financial firms.