The tremors caused by Trump’s tariff considerations have only just come to a halt. After the shock of his statement on Easter Monday that he wanted to fire Jay Powell, which he refused to do on Easter Tuesday, the USD fell to as low as 1.1575 EUR/USD.
There is a significant resistance level at 1.15 EUR/USD, which has held for now, but has already been breached, which is an indicator for the USD on the chart.
Fundamentally, there is no reason to expect the USD to strengthen. The overvaluation of US equity markets is still legendary, government debt is still very problematic and there is a risk of recession in the US. Given the collapse in shipments to the US from Europe and Asia in particular, it is likely that many consumer goods will be in short supply this summer.
New Problems in the Supply Chain to Be Expected
If the US does not reach an agreement with China quickly, international supply chains are likely to be severely affected. 37% of all US imports from China are primary products that are further processed in the US. If China stops supplying, this could quickly create a problem for the chip industry, especially in the case of rare earths, which would not only affect the US.
It is impossible for me at this stage to estimate the extent to which European companies will be affected by disruptions. However, I expect that Mexican production facilities, which are often used for processing for the American market, will be affected.
In addition to the strains on the supply chain, further problems are expected for the US economy.
USA Sees Fewer Tourists
29 April 2025 Canadians and Europeans are cancelling their holidays in record numbers. Tourism to and in the US is a mega-industry facing a 15% to 20% decline. This affects many industries, but especially airlines, hotels and restaurants.
Canadians have cancelled a third of their trips to the US. Even the real estate market is experiencing a sell-off by Canadian property owners who are turning their backs on the US. That’s what happens when you threaten your neighbours with an unfriendly takeover.
Uncertainty is a Problem for Smaller Businesses
The absurdly high tariffs imposed by the US are a problem that primarily affects American importers, who have to pay these tariffs. They are often forced to pass on the prices because they cannot/do not want to bear the increased costs.
The resulting uncertainty about future sales is leading to a decline in investment, which in the medium term will have a negative impact on innovation, employment and economic growth.
Hard facts are still scarce, but some early indicators point to a significant slowdown in the second half of the year.
If this becomes clear, there are several consequences:
– Economic slowdown leads to fall in stock market prices and tax revenues
– Outlook for 2026 tax revenues clouded by falling stock prices
– Falling tax revenues exacerbate the US debt problem, which in extreme cases leads to rising bond yields and a much weaker USD.
