Dollar Faces Pressure on Trump’s New European Tariff Threats

Core Viewpoint - The announcement of a 10% tariff on European countries by President Trump has led to a decline in the dollar, raising concerns about holding American assets due to unpredictable US policies [1]. Currency Impact - European currencies, particularly the Swiss franc, have gained strength as investors seek safe-haven assets, with the euro recovering from a two-month low [2]. - The Swiss franc is expected to benefit significantly in a context of a weaker dollar [3]. Market Dynamics - Elevated USD exposure in Europe may prompt a rebalancing of dollar assets, especially if the EU activates its anti-coercion measures, which could disrupt capital markets more than trade flows [4]. - Trump's tariff threats have reignited the trend of "selling America," with potential implications for the USD as a negotiating tactic [5]. Geopolitical Risks - The eurozone may face cyclical challenges due to increasing geopolitical risks under Trump's presidency, potentially exacerbating pressures related to the ongoing conflict in Ukraine [6]. - US assets are now perceived to carry a higher political risk premium, which may lead foreign investors to reduce their exposure to US assets [7].