Euro Falls as US Tariff Threatens Europe Exporters
The euro pulled back against the US dollar on Tuesday as the market weighed a 30% tariff on European trade with the United States under President Donald Trump’s administration.
Euro/dollar settled at 1.1603 dollars, down by 0.55% on the day after hovering near a three-week low, as traders weighed ongoing trade developments.
Trump announced a 30% tariff on imports from the European Union starting August 1st, though he later signaled openness to negotiations.
Europe’s exporters will struggle to make up for lost U.S. demand as higher tariffs push up prices, Oxford Economics’ Matthew Swannell writes in a research report.
The US threatened to slap EU imports with entry duties as high as 30%, part of President Trump’s plan to redress trade deficits with major partners and shore up domestic manufacture.
The U.S. is the largest outside market for the EU and is vital for key export sectors such as cars and drugs, Swannell notes.
But the European Union plans to secure a trade agreement and said it would hold off on immediate countermeasures, extending the suspension of planned retaliatory tariffs until early August to allow for continued dialogue.
On the monetary policy front, investors largely expect the European Central Bank (ECB) to keep borrowing costs unchanged at next week’s meeting. However, markets are still pricing in one more 25b basis points rate cut later this year.
Despite the recent pullback in July, the euro remains up nearly 13% against the dollar year-to-date, supported by broad dollar weakness and renewed optimism about the Eurozone’s economic outlook, particularly after Germany’s shift toward increased fiscal spending.
The European Union aims to finalize a preliminary agreement with Washington this week to secure a 10% tariff framework beyond the August 1 deadline, while talks toward a permanent deal continue.
On Tuesday, reports surfaced that the US proposed maintaining a 10% baseline tariff, with exemptions for key sectors such as aircraft and spirits.
However, Washington has shown no willingness to extend exemptions to politically sensitive industries, including cars, steel, aluminum, and pharmaceuticals, despite requests from Brussels.
In response, the EU is preparing retaliatory tariffs on various US goods and has warned that additional measures—such as export controls and restrictions on US companies’ access to public contracts—could follow if no deal is reached. #Euro Falls as US Tariff Threatens Europe Exporters#
