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Trump can collapse the euro exchange rate if he wins the election

Author:
Olha Bereziuk
Date:

The euro could fall by 10% if Donald Trump wins the election as he plans to impose wide-ranging tariffs and cut domestic taxes.

Such a forecast is given by Goldman Sachs, one of the largest investment companies in the United States and the world, Reuters reports.

Experts at Goldman Sachs believe that a scenario in which Republicans win the presidential election and win Congress could lead to higher tariffs and lower domestic taxes, which would stimulate the economy.

As a result, a 10 percent US tariff on all imports and a 20 percent duty on Chinese products, combined with tax cuts, could lead to a sharp rise in the dollar and a drop in the euro by 8-10 percent. The euro last traded at $1.083, and below parity, in November 2022.

Both measures are likely to lead to higher inflation — meaning much higher interest rates in the US than in Europe, making the dollar more attractive.

In the case of a tighter policy, in which Trump only imposes additional tariffs against China, the euro is expected to fall by about 3%.

"A Democratic victory or a divided Democratic government is likely to lead to some initial decline in the dollar as markets reevaluate the prospect of more dramatic changes in tariffs," Goldman Sachs said.

The euro fell 2.7% in October as the U.S. economy pulled away from Europe and some investors expected more tariffs after a possible Trump victory.

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