Recently, the US President sent additional letters to various trading partners, including the EU. These letters indicate that imports from the EU will incur a 30% tariff starting August 1st, which is noticeably higher than what was initially announced. Last week’s market reaction seemed somewhat relaxed about this, similar to past instances of proposed tariffs that seemed unexpectedly high. As of this morning, the EUR/USD continues to trade below the 1.17 threshold.
EUR/USD continues to trade below the 1.17 mark
Market reactions are often linked to what’s known as the “taco” trade. Some speculate that “Trump always kicks out chickens,” meaning he tends to backtrack—a pattern observed multiple times since the original announcement. However, there may be another factor at play. The government has eliminated all tariffs on US imports in an effort to reduce the originally planned mutual tariffs.
If Trump can indeed leverage significant concessions from US trading partners through tariff threats, this might be a boon for the dollar. Particularly when those concessions involve lowering tariffs on US goods, this could create some positive movement.
Businesses looking to secure their plans regarding US tariffs in the short term may find themselves quite disappointed. Instead, they need to consider if they can navigate the uncertainty brought on by these new tariffs over the next three to six months.
