Trump is Making the Euro Great Again – What Does this Mean for Australia?

Donald Trump’s latest tariff escalation is creating an unintended winner: the euro.

The US president has announced an additional 25% duty on Canadian steel and aluminium imports, bringing the total tariff to 50%. Effective from Wednesday, this move is disrupting global trade flows and triggering market reactions that extend beyond the metals sector.

In the immediate aftermath of the announcement, the euro surged 0.7% against the US dollar, reaching $1.091.

Nigel Green, CEO of global financial advisory firm deVere Group, noted the significance of the currency reaction. “It’s a sharp reminder that currency markets are not just about monetary policy but also about geopolitical realities. And right now, Trump’s aggressive protectionism is tilting the scales in favour of the euro,” he said.

This development is not just about trade tensions but also highlights wider concerns about the trajectory of the US economy under Trump’s leadership.

“Investors are beginning to price in the risks of a more fragmented global economy, with supply chain disruptions and inflationary consequences in the US,” Green added.

In Europe, optimism is growing, particularly as German policymakers reportedly move closer to a defence spending deal, with Trump’s rhetoric also prompting wider military investment across the continent.

“This combination of Trump-triggered eurozone fiscal expansion and dollar weakness is creating the perfect storm for a stronger euro,” Green observed.

Implications for Australian Businesses

While much of the focus remains on the US and Europe, Trump’s latest tariff move could also have notable consequences for Australia. The depreciation of the US dollar and strengthening of the euro could shift global trade and investment patterns, affecting Australian exporters and businesses with international exposure.

A stronger euro makes European assets more attractive, with increased investment flowing into German and French stock markets. As Nigel Green explains, “Stock markets in Germany and France, often seen as barometers of economic confidence, are already drawing renewed interest from global investors. At the same time, European sovereign bonds are regaining appeal as a hedge against US volatility.”

For Australian businesses, this shift could mean increased competition when exporting to Europe, as the stronger euro makes European goods more expensive in international markets, potentially boosting demand for Australian alternatives. However, a weaker US dollar could have mixed effects. On the one hand, Australian exporters to the US may find their goods more expensive for American buyers, reducing competitiveness. On the other, US imports could become more affordable, benefiting Australian companies reliant on American products and materials.

Currency fluctuations could also impact investment strategies. As Green points out, “Euro-denominated assets—equities, bonds, and alternative investments—are gaining favour as the US faces the risks of economic nationalism.” This could see Australian investors shifting capital towards Europe, adjusting portfolios to capitalise on market movements.

Ultimately, Trump’s trade policies are reshaping global financial landscapes. As Green puts it, “The man who has spent years railing against Europe’s trade policies is now inadvertently giving the euro its best run in months. Markets are reading Trump’s economic strategy as a reason to reallocate capital away from the US and towards Europe.”

With heightened volatility ahead, Australian businesses and investors should remain alert to further market shifts and the opportunities they may present.

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