While Trump's tariffs have been the main point of discussion for a good while on the economic side - for good reason - economy is complex and it's not the only thing to keep an eye on.
I noticed last week when Trump announced the last series of tariffs that the next day Euro gained some value compared to USD... That triggered my warning bells because, maybe counter-intuitively, that isn't good for the European Union, and I'll explain why.
But first, let's see a wider context, because one-day price change doesn't mean anything in the long term. However, we have a trend since Trump came to office. Here it is:
USD lost 5.54% value to EUR on a YTD basis. Note that on the same trend we find GBP, and JPY, among the top currencies, but none other. Not even CAD or MXN, which are the currencies of top "bashing" candidates of Trump discourses, Canada and Mexico. CNY either (Chinese Yuan), but that is a "controlled" currency, and it's expectable to see at least a neutral if not favorable evolution there (it was neutral this year).
Also, for context, note that USD traditionally gained value compared to other global currencies in recent years. Which, let's admit, wasn't great for the US economy (unless you ask a US consumer spending abroad).
Now let's get back to the EU, which just got some hefty tariffs set for exports into the US, and a currency that appreciates compared to USD. What a combination, huh?
It's true, if you hold some EUR savings, or if companies hold some EUR cash on hand, that's a good thing, but overall, that's a bad thing for the European Union, because it affects EU's exports in USD, on top of the tariffs set for imports to the US.
That's because for products fully manufactured in the EU, all prices are in Euro so the price of the product if you were to sell it for USD grows if USD devalues compared to EUR.
If imports in USD are also used to manufacture the product (assuming no extra tariff), the price could be cheaper (depending on transportation costs too), but also means the EU's trade balance grows more toward imports, becoming more dependent on them.
Sure, if we look at the all-time-chart between USD and EUR (since the 1980s), what we have now is a blip in the chart:
Also, all-time, USD gained almost 37% to EUR.
But if the current trend continues, coupled with the tariffs, it won't be good at all for European exports, even if it doesn't seem like much at this point.