Key moments

• Euro gains momentum following Trump’s congressional address and tariff implementations.
• Dollar weakens to a four-month low against the euro as trade war fears escalate.
• Market anticipates potential European countermeasures as U.S. tariff threats loom.

The Euro Emerges as Significant Beneficiary as President Trump’s Tariff Policies Take Effect Against Key U.S. Trade Partners

The EUR/USD pair experienced a notable surge late Tuesday and maintained its elevated position into early Wednesday, following President Trump’s address to Congress. The U.S. dollar weakened significantly, reaching a four-month low against the euro, with the EUR/USD pair climbing to $1.0620, a level unseen since mid-November.

During his two-hour address, President Trump reiterated his commitment to trade tariffs, signaling no intention to retreat from a looming trade war. He expressed his vision of propelling America into a “golden age” through tariffs, tax cuts, and enhanced government efficiency. This stance further intensified market concerns about the potential impact of his trade policies.

Evidence has already emerged indicating that Trump’s tariffs are adversely affecting consumers and posing a threat to global economic growth. “There will be a little disturbance, but we’re okay with that,” Trump stated regarding his extensive tariff increases. “It won’t be much.”

He further articulated his administration’s trade strategy, stating, “Whatever they tariff us, other countries, we tariff them. Whatever they tax us, we will tax them. If they do non-monetary tariffs to keep us out of their market, then we do non-monetary barriers to keep them out of our market. We will take in trillions and trillions of dollars and create jobs like we have never seen before.”

The euro has experienced a sustained upward trajectory over the past few months, driven by forex speculators’ concerns that the implemented tariffs will negatively impact the global economy. Canada, Mexico, and China have already announced or implemented retaliatory measures.
Europe remains vigilant, anticipating potential U.S. tariffs. President Trump has threatened tariffs of up to 25% on European goods, although he has yet to provide a specific timeline or detailed information. This uncertainty continues to influence forex markets and investor sentiment.