Trump claims that the Supreme Court has given him more power by repealing tariffs. The US president is introducing new ones. The problem is that Section 122 of the Trade Act assumes a balance of payments crisis, which is nowhere to be found in the US. Let’s discuss this topic and make a trading plan for the EUR/USD pair.
The article covers the following subjects:
Major Takeaways
- The US economy will benefit from the cancellation of tariffs.
- The average rate fell from 16% to 13.7%.
- The new duties may be disputed in court.
- Short positions opened at 1.1835 can be increased.
Weekly US Dollar Fundamental Forecast
Donald Trump is threatening countries with higher tariffs if they refuse to sign deals. He claims that the Supreme Court has given him more power and authority. The US government can use licenses to do terrible things to other countries. Judging by the fall in the EUR/USD pair, such statements elicit a smile rather than fear.
When predicting the exchange rate, ask yourself: who benefits from it? Looking for winners and losers can be very informative. When Donald Trump returned to office, tariffs became inevitable. Many investors sold the EUR/USD pair, believing that tariffs would destroy the eurozone’s export-oriented economy. The US is the top destination for EU exports, meaning the bloc has to pay more than others.
US Imports
Source: Bloomberg.
However, numerous studies, including an analysis by the New York Fed, have shown that up to 90% of shipments to the United States are actually paid for by American consumers. This means that the 10 percentage point increase in tariffs to an average rate of 16% in 2025 hit the US economy harder than its counterparts. They used fiscal stimulus to support their exporters. As a result, many countries saw an increase in their foreign trade surplus, which seems counterintuitive at first glance.
Current Account Balances in US and Other Countries
Source: Bloomberg.
If Americans are forced to pay for everything, then reducing the average tariff rate from 16% to 13.7%, as Yale University estimates, should primarily boost the US economy. This figure accounts for Donald Trump’s new 15% tariffs for 150 days, introduced under Section 122 of the Trade Act.
However, 15% is significantly less than the 145% imposed at the peak of the trade conflict with China. In addition, even after numerous deals were concluded, tariffs against most countries fell to 15–20%.
There is another important nuance: US tariffs are not as harmful as they say. Section 122 of the Trade Act can also be challenged in court, just like previous legislative acts. It covers the introduction of tariffs in the event of a balance of payments crisis. However, the US is not experiencing any such crisis. If it did, foreign investors would withdraw money from the markets en masse, and the dollar would plummet.
Thus, just as the Supreme Court overturned Donald Trump’s old tariffs, it may, over time, strike down the new ones as well. This will benefit the US economy and the greenback.
Weekly EURUSD Trading Plan
Short positions on the EUR/USD pair formed at the resistance level of 1.1835 appear to be a sound decision in this situation. The cancellation of tariffs and the Fed’s extended pause provide a powerful boost to the US dollar. The recommendation is to maintain and increase short positions on the main currency pair.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance broker. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2014/65/EU.
According to copyright law, this article is considered intellectual property, which includes a prohibition on copying and distributing it without consent.