The decision to cancel the tariffs will be the biggest threat in the history of the United States and will literally destroy the United States. That’s what Donald Trump claimed on the eve of the Supreme Court verdict. When he was pronounced, his words seemed prophetic – the American dollar really collapsed. However, the owner of the White House was not at all embarrassed by the judges’ decision on the illegality of the duties. He immediately introduced new ones and stated that it was possible to raise even more money. Does this mean that the EURUSD music on Bykov Street won’t be playing for long?
The verdict on the illegality of the tariffs was passed by six votes to three. However, the Supreme Court did not say what to do next. This allowed Donald Trump to immediately impose 10% duties, which in a few hours turned into 15%. The basis this time was Section 122 of the Law on Trade. It allows you to enter fees at a rate of up to 15% for 150 days. After that, the White House can refer to Section 301 to justify longer tariffs. All this should be accompanied by lengthy investigations. But who doubts that they will be produced?
Investors considered that the main driver of the fall in the US dollar in response to the announcement of the verdict of the Supreme Court was chaos. They say that the uncertainty of the White House’s policy is more harmful than it helps the greenback. However, if you dig deeper, the reason may be problems with the refund of previously paid duties. This will require decisions from lower courts and will take months. It is known that about 90% of fees fall on the shoulders of American companies and households. They, together with the government shutdown, made the main contribution to the slowdown in GDP from 4.4% to 1.4% in the fourth quarter.
The return of tariffs can be regarded as a fiscal incentive. The longer you don’t get it, the worse it is for the US economy. Judging by the slowdown in American business activity and the acceleration of its European counterpart in February, the difference in economic growth between the United States and the eurozone is narrowing. This circumstance, coupled with the divergence in the monetary policy of the ECB and the Fed, underlies the upward trend in the EURUSD. Isn’t it time for him to recover?
Germany is once again becoming the locomotive of the European economy, where purchasing managers’ indices in the manufacturing sector, thanks to fiscal incentives from Friedrich Merz and increased defense spending, entered the territory of expansion for the first time in three years.
Tariff uncertainty is really bad for the US dollar, but it may also prevent the Fed from resuming its monetary expansion cycle.
