towards a new currency war?

The dollar is at its highest level in two years against the euro. The greenback takes full advantage of Donald Trump’s upcoming return to power in the United States

The parity today is 1.02 dollars per euro, unheard of since November 2022. Added to the Trump effect is the surprising drop in applications for unemployment benefits in December in the United States. 211,000 files registered, the lowest since last April. The American economy is reassuring and pushing the dollar upwards as a safe haven in the face of a less favorable situation elsewhere in the world.

The elected Republican president is ultra liberal, with the desire to deregulate the economy, finance and electronic currencies. Investors say that the American El Dorado is being reborn and are transferring their money to New York. But this is not without risk… that of inflation.

Because, by imposing significant customs duties on foreign products imported into the United States, Donald Trump will create a natural phenomenon: on the one hand, American distributors will pass on the cost of taxes on the products sold, and the prices of these products will automatically increase. First inflation effect. At the same time, product manufacturers on American soil will also increase their prices to take into account the increase in the cost of imported raw materials. Second inflation effect. A massive price increase in the United States seems inevitable, with the negative effect on consumption.

In this context, Trump’s America will want to strengthen the exports of its products. From this perspective, the Americans’ interest will be not to have a dollar that is too strong, because that would make their exports more expensive. It is the same for us Europeans: a strong euro makes our exports more expensive, which makes us less competitive on the world stage. The pride of a “strong” currency no longer makes sense in the context of international competition. What matters are the laws of commerce: selling as much as possible abroad at advantageous pricing conditions.

It’s not just the dollar and the euro. There is also the Yuan, the Chinese currency. Needless to say, in this international fight, Beijing is not going to give in. 2025, new currency war with the arrival of Trump in the White House… it will not be a series produced by Netflix.