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US dollar on the decline: is Europe threatened with trade chaos?
The US dollar is losing sharply in value, which has an impact on exports, imports and inflation in Europe. Details on the current economic situation.
US dollar on the decline: is Europe threatened with trade chaos?
The US dollar has lost 10 percent of its value since the beginning of the year and is at its lowest level in three years. This development could have far-reaching effects on the US economy and international trade. A weak dollar could boost US exports, but at the same time also make imports more expensive, which offers a certain level of protection, especially to US companies.
However, economists warn that the US dollar may lose its status as a safe asset in times of crisis. Investors are already showing increased interest in gold, driving up the price of the precious metal. For European tourists, vacations in the US are becoming cheaper due to the weaker dollar, while online shoppers can purchase US products cheaper, but have to keep tariffs and shipping costs in mind.
Impact on international trade
The weak dollar also has consequences for German exporters, among other things. A weak dollar makes German exports to the USA more expensive, which could affect the competitiveness of German companies. At the same time, energy imports from the USA, which are billed in dollars, will become cheaper, which could reduce energy prices in Europe. Cheaper US imports could also dampen inflation in Europe as companies have to spend less on products from the US.
According to a report by Goldman Sachs Research, US tariff policy could further contribute to the devaluation of the dollar. Changes in U.S. tariffs on imports can have varying effects on the economy, with the costs of tariffs often being borne by domestic consumers and businesses. For example, a 10 percent across-the-board tariff could result in the U.S. being hit more by the costs, which could worsen U.S. trading conditions and further devalue the dollar, such as ZDF reported.
The current tariff situation is significantly different from the previous administration, in which U.S. companies could consider sourcing goods outside of China to avoid tariffs. Now it could become harder for American companies to avoid tariffs and they could be forced to adjust to lower margins, which could ultimately lead to a weaker dollar, like Goldman Sachs stated.