Trump tariffs, greenback’s dip a double-hit to eurozone exports | EUROtoday

The US greenback continues to fall sharply in worth in opposition to different main currencies, persevering with the pattern that noticed its steepest annual drop in virtually a decade in 2025.

The greenback fell by 1.3% in opposition to a basket of currencies on Tuesday, that means that it has fallen by 2.6% because the begin of 2026. It slumped by 9.5% in 2025.

The fall within the greenback has implications for the euro and different currencies. The single European forex has now hit the $1.2 degree for the primary time since 2021, whereas the British pound and Japanese yen have additionally reached current highs in opposition to the US forex.

Several economists and analysts have attributed the greenback’s persevering with decline to a scarcity of investor religion within the US forex amid persevering with concern over unpredictable policymaking from US President Donald Trump.

There can also be the view that Trump and lots of in his financial group need the greenback to lose worth within the hope that it’s going to enhance US exports and manufacturing as a part of a long-held technique.

Trump has finished little to dispel this.

When requested this week if he was involved by the greenback’s fall in worth, he mentioned: “No, I think it’s great.”

Stephen Miran, a former chairman of Trump’s Council of Economic Advisers and now a member of the Board of Governors of the  US Federal Reserve, printed a “User’s Guide to Restructuring the Global Trading System” in November 2024 with doable instruments for correcting the commerce deficit, mentioning particularly tariffs and devaluation of the greenback as the primary devices.

Should Europe care?

Whatever the implications of a falling greenback for the US financial system could also be, it has penalties for the eurozone financial system and the euro, which surged by 13% in opposition to the greenback in 2025 already — its greatest 12 months since 2017.

Jack Allen-Reynolds, deputy chief eurozone economist with financial consultancy Capital Economics says the rise of the euro issues as a result of it performs an “important role in the performance of the economy, the health of the labor market and households’ financial position.”

“A stronger euro makes exports less competitive, harming the region’s manufacturers, while making imports cheaper, lowering prices for consumers,” he instructed DW.

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Ricardo Amaro, lead eurozone economist for Oxford Economics, an financial forecasting and advisory agency, notes that if the euro continues to rise in worth in opposition to the greenback, it could make European corporations that export quite a bit to the US much less and fewer aggressive.

Although this may be offset by cheaper costs for US merchandise on European cabinets, he believes the present change price, if maintained, would have a unfavourable influence on European progress.

“Our global economic model suggests Eurozone GDP would be around 0.2% lower by year-end should the euro-dollar exchange rate remain at current levels, rather than around the $1.16 level that acted as a reference point post EU-US trade deal in late July,” Amaro instructed DW.

A combined image for exporters

However, Zsolt Darvas, a macroeconomics specialist with the Bruegel suppose tank in Brussels, Belgium, factors to the truth that in periods when the euro was valued considerably larger than it’s now, European exports nonetheless carried out nicely.

The newest worth of $1.20 remains to be beneath ranges noticed throughout 2021, and considerably decrease than the $1.30 to $1.50 vary regularly seen from round 2004 to 2014, Darvas instructed DW.

“The recent slight decline in the dollar is unlikely to cause significant economic troubles in Europe,” mentioned Darvas, including that widespread media protection of the falling US greenback might even “encourage investors to shift their focus from US investments to the EU.”

But given how exporters have already been jolted by Trump’s commerce tariffs final 12 months, there are issues that the change price might “deal another blow,” he cautions.

Companies within the STOXX Europe 600 inventory market index of main European corporations derive round 30% of their revenues from the US, in line with Goldman Sachs.

While the stronger euro is already tied to extra optimistic progress estimates, sure European sectors may very well be weak to a cheaper greenback.

Ricardo Amaro says the pharmaceutical and automotive sectors are particularly in danger, though he thinks the US reliance on European pharmaceutical merchandise might offset any potential injury.

Jack Allen-Reynolds, in the meantime, factors to usually weak eurozone exports lately, notably as a consequence of intensifying competitors throughout a variety of sectors from China.

“We doubt that the moves seen so far would have a very big impact on export demand, but it certainly won’t help,” he mentioned.

Time for ECB market intervention?

The surge within the euro in opposition to the greenback has prompted hypothesis as as to whether the European Central Bank (ECB) ought to intervene in some kind.

Austrian central financial institution governor Martin Kocher thinks the euro’s current positive factors have been “modest” however mentioned the ECB must intervene if the change price began to decrease inflation forecasts.

Most analysts agree that now isn’t the time for any important intervention in financial coverage, however warn additional hikes within the worth of the euro might drive ECB policymakers’ arms if inflation objectives have been to be impacted.

Ricardo Amaro already sees ECB policymakers attempting to affect market expectations by stating they’re “monitoring the situation and voicing some concern about recent moves.”

“This brings rate cut discussions back into the table and acts against the euro appreciation momentum,” mentioned Amaro.

For Allen-Reynolds there’s additionally no have to act primarily based on the change price adjustments to date seen in January. However, additional adjustments might see the ECB chopping rates of interest later this 12 months, he believes.

And Zsolt Darvas argues the present inflationary influence is near zero and that no sector is particularly weak.

“Exchange rates have fluctuated widely over the past decades, and companies have adapted to manage much larger swings in exchange rates than what we are currently observing,” he mentioned.

Edited by: Uwe Hessler