The commercial war is also disputed in the field of currencies. The exchange rate of coins is a crucial factor in the cost of exports and imports. Therefore, in a context of uploading tariffs in the United States and a probable response from the European Union (EU), the cross between the euro and the dollar becomes a weapon of the commercial conflict scaled by Donald Trump. As? For example, a depreciation (fall) scenario of the euro compared to the dollar lowers exports from the EU to the United States.
The currency market is the largest and largest financial market, as the British economist Jim O’Neill, former president of the Goldman Sachs manager and former Treasury Minister of the United Kingdom, and author of the acronym Bric in 2001 (to refer to the great emerging economies Brazil, Russia, India and China, which now is a forum expanded to other countries such as South Africa, o Middle East dictatorships). A “where all known information is quickly incorporated into prices,” says this expert In this tribunerecently published. “Information” is today totally eaten away by “uncertainty.” Paradoxically, this is the only certainty that the central banks, the Federal Reserva (FED) and the ECB, which decide official interest rates in each economy and directly influence their currencies.
The euro has depreciated about 3% compared to the dollar since the end of September 2024. That is, eurozone companies sell 3% cheaper to the United States today than six months ago due to the fall of the currency. Economic theory says that the exchange rate ends up being neutral for long -term businesses. But times are important in a commercial war, especially before changing positions almost overnight.
Exactly, on September 25, the euro was quoted at $ 1.12 and came to deprecate up to 1.02 “in recent weeks.” That means “a depreciation close to 10%, which would more compensate in itself potential tariffs of that same amount,” explains Federico Steinberg, In an article at the Royal Analysis Center Elcano.
From that minimum of the euro in 1.02 dollars referred to in this investigator, of mid -January, the common ‘currency’ has bounces to $ 1.09, as seen in the graph. The ECB offers several explanations in Your last economic newsletter. One, “the publication of updated information on the orientation of the EU fiscal policy”, which involves an increase in public spending and investment, starting with defense. Two, “the general increase in global risk appetite, despite tariff ads and some concern about the macroeconomic perspectives of the United States, which were reflected in a decrease in the differential of interest rates between the American country and the eurozone.”
This “interest rate differential” is key to the exchange rate. Currently, there is a two -point gap between the official reference of the ECB itself, which after the last March cut is 2.5%, and the Federal Reserve, which this month has maintained them at 4.5%. A larger differential in favor of the United States acts as a money vacuum to dollars (mainly debt), weakening the euro. “Lower financing costs [más bajadas de tipos en la eurozona] Not only would they boost European domestic demand, but will depreciate the euro, compensating for the effect of US tariffs on European exports, ”says Federico Steinberg.
Of course, at the same time, a weak euro increases imports in the American currency. Being especially a risk to general inflation oil, which is traded in dollars in international markets and from which Spain and the rest of the partners are very dependent.
“If the ECB responds to American tariffs with more low interest rates is not discharge that the euro falls below parity with the dollar, which would compensate tariffs over that 10% to which reference has just been made,” this expert continues. For example, expectations about the exchange rate have already varied significantly, although they are usually one of the most stable components of macroeconomic paintings. In October 2024, The Government He launched its projections with one euro at 1.1 dollars in 2025 and 2026. This month, The Bank of Spain He has built his estimates with one euro at 1.04 for these two years, 5.5% below.
Interest rate decisions depend on the expectations of inflation and economic growth of central banks.
At the moment, in an environment of “chaos”, commercial and geopolitical, both the ECB and the Fed have reduced their progress forecasts of GDP (gross internal producer) and have slightly raised those of inflation. With these cuts, the stagnation is expected more accused in the Eurozone.
The president of the ECB, Christine Lagarde, mentioned the risk of a new rebound in price increases this week, in an intervention in the European Parliament: “In the short term, EU retaliation measures and a weaker euro exchange rate, derived from the lowest American demand for European products, could raise inflation at approximately half a percentage point [desde el 2,5% en promedio proyectado para 2025 en el conjunto de la eurozona]. The effect would be mitigated in the medium term because the lower economic activity would moderate inflationary pressures. ”
“The excessive strength of the dollar especially worries the United States, whose authorities know that it is partly an effect of its commercial policy, which makes less credible that maintains a maximalist protectionist position if you think you have obtained concessions,” says Federico Steinberg.
This researcher, Together with Enrique Feásrecalls in another report that tariffs “do not pay them the rest of the world, but importers, whether consumers or local producers” who use imported goods or services in their business. “The argument that exporters, to maintain their market share, will reduce their sale price and, therefore, their margin is not verified as a general character. multiple studies that have been carried out on the tariffs imposed during Trump’s first mandate (2017-2021) conclude that importers moved the effect of tariffs on companies and households, ”they emphasize.
“The EU and the United States bilateral trade balance has a balance of 235,000 million dollars favorable to Europe (16,000 million in agri -food and 100,000 million in cars), although the balance of services throws a balance of 134,000 million favorable to the United States. This suggests, as they have explained various European sources, that the relationship is relatively balanced and there should be room for a negotiation that will avoid a negotiation that will avoid a negotiation that will avoid a negotiation that avoids a negotiation that avoids a negotiation that avoids a negotiation. It does not seem that the Trump administration shares this diagnosis, ”they add.
“Some of Trump’s closest economic advisors have openly talked about the need to strengthen other coins. That is why they have been promoting a new version of the famous agreement of the 1985 square, for which Japan and Germany agreed to strengthen their own currencies against the dollar to appease the United States,” considers Jim O’Neill, who thinks that “there are cyclic, structural and even systemic factors Probability of continuous weakening of the dollar ”.
“What seems clear to me is that the Trump administration focuses on American manufacturing and its own definition of competitiveness, none of which offers many reasons to expect a persistent strengthening of the dollar. It is true that the usual counter -argument is that tariffs are necessary because the strengthening of the dollar is unstoppable, given the incomparable advantages of the ‘exceptional’ American economy,” he says.
This expert explores a “systemic dimension.” According to which, the strength of the dollar has remained for so long because its value is closely linked to the power of the United States as guarantor of security and dominant actor in multilateral institutions after World War II. “If the United States now abandons these roles, others will be forced to defend their own interests, and the indisputable domain of the dollar could finally come to an end,” he concludes.
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