Forex analytics. EURUSD: there will be no old friendship – ForexNews.PRO
The tariffs imposed by the White House on Greenland were a real bolt from the blue, but the reaction of the markets was far from as violent as on the Day of America’s Liberation. Why? Are investors used to Donald Trump? Are they counting on TACOS? Or can they not understand the full scale of the catastrophe of the split within the West and the potential disintegration of NATO? Whatever the outcome of the confrontation, there is an understanding that the former friendship between the United States and Europe will no longer exist. The relationship has become toxic.
The return of the slogan “sell America”, forgotten since April, led to an increase in EURUSD quotes. However, this is not the only reason for the strengthening of the euro. Europe is the largest customer of the United States in the military sphere. The conflict could lead to fiscal incentives and increased defense spending from domestic sources. Investors have already seen something similar after Friedrich Merz came to power in Germany.
On paper, Europe looks like the loser in the trade war even before it started, due to the greater volume of shipments of goods to the United States than in the opposite direction. However, Deutsche Bank is seriously talking about “capital weapons.” According to Societe Generale, the US net international deficit is huge and poses a serious threat to the dollar. However, only if the owners of American assets are willing to suffer financially.
According to the US Treasury, Europeans own about $10 trillion of American assets. These are mainly stocks, although the share of the Old World in the structure of foreign holders of treasuries is about 40%. The money is enormous, but it is difficult to use it as a weapon of retribution. They are held in private funds, and holders should be prepared for losses due to the desire to take revenge on the United States for tariffs.
The pressure on the US dollar is exerted by studies confirming the fact that import duties were paid not by non-residents, but by Americans. According to the Kiel Institute of World Economy, tariffs are a tax on the domestic consumer, not a fee for access to a large and beautiful store under the banner of the United States. 96% of the fees are paid by their population, and only 4% are paid by foreign suppliers.
History repeats itself. The reaction of the markets resembles that of April, but on a smaller scale. However, there are other parallels. During the US-China trade war in Donald Trump’s first presidential term, the topic of Beijing’s retaliation by selling American assets was actively discussed. Then the mutual exchange of blows strengthened the US dollar and weakened the yuan. How will it be this time?
