What caused panic yesterday may go unnoticed today, and vice versa. In 2025, Donald Trump’s tariff wars sent financial markets into a tailspin, but investors have since learned their lesson. It is hardly surprising, then, that the impending rollout of sweeping new import tariffs is no longer sending shivers down the spines of EUR/USD traders.
Recall that in February, the Supreme Court struck down the lion’s share of Trump-era tariffs, replacing them with temporary levies valid for 150 days. That transitional period is now drawing to a close, and the White House is poised to implement long-term duties that will cover nearly 99% of all U.S. trade. While import-export operations stabilized during this “breathing space,” the lull is coming to an end. Will this serve as a trigger for a fresh spike in Forex volatility?
Unlikely. First, traders already have a “playbook.” When draconian tariffs hit the market in April 2025, the U.S. dollar initially spiked on expectations of inflation and Fed rate hikes. However, the realization soon set in: Americans themselves would bear the brunt of these taxes, which would weigh on GDP and force the Fed to ease its monetary policy. That is exactly what happened, ultimately resulting in a slide for the greenback.
Second, the new levies will be considerably milder. The expected 10% rate will apply to about a dozen trading partners (including the EU, Canada, and Mexico), while a 12.5% rate will target roughly four dozen countries (China, India, Japan, and South Korea). Yes, surprises are always possible, but this “sequel” is clearly going to be far less daunting than the original, and the market is highly likely to brush it off.
Far more attention is currently focused on geopolitics. Bombings in Iran have now entered their 11th day. Washington claims that Tehran is eager for negotiations, but the Iranian side flatly denies this. Brent crude has resumed its rally, which is amplifying inflation risks, pushing U.S. Treasury yields higher, and providing underlying support for the dollar.
However, the euro is in no hurry to concede ground. German investor confidence has hit its highest levels since February, buoyed by expectations surrounding Friedrich Merz’s economic reforms. EUR/USD bulls are banking on hawkish rhetoric from the ECB, while the ongoing rally in equity markets is dampening demand for the dollar as a safe-haven asset.
Ultimately, we are witnessing a stalemate: both sides hold strong cards and are playing them actively. This dynamic has forced EUR/USD into a tight consolidation range between 1.138 and 1.145. Only a decisive breakout beyond these boundaries will allow the pair to establish a new trend. For now, the optimal strategy remains range-bound trading.
