Growing fears of a recession in the United States have seen the European single currency the euro and the British pound both record their highest rates against the US dollar since last November’s presidential election.
President Donald Trump’s flurry of tariffs introduced on Wednesday on a wide range of goods from many nations, designed to encourage productivity in the domestic market, has caused major economic shock waves, with currency markets giving a clear demonstration of their impact.
On Thursday morning, the euro was worth $1.086, having been as high as $1.093 the day before, which was the first time it had broken the $1.09 barrier since Trump’s election win, and the pound was worth $1.295.
The response of Canada and the European Union, two major US trading partners, to the tariffs was to impose charges of their own.
Canada’s prime minister-designate Mark Carney, who has walked straight into a trade war with a neighboring country before he has been formally confirmed in his job, said he was willing to negotiate a new trade deal with Washington, provided there was “respect for Canadian sovereignty”, in the light of Trump’s comments about Canada becoming the US’ 51st state.
The EU has also responded with tariffs on a range of US goods, to take effect from the start of next month.
European Commission President Ursula von der Leyen called it a “strong but proportionate” response, but said the EU stood “ready to engage in a meaningful dialogue”.
“Tariffs are taxes. They are bad for business and worse for consumers,” she said. “Nobody needs that — on both sides, neither in the European Union nor in the United States.”
When asked if he would reply to the responses, Trump replied “of course … whatever they charge us with, we’re charging them”.
In addition to currency fluctuations, share prices also suffered with markets across the world losing value as a consequence of increasingly strained international economic relations.
“The situation has left many observers questioning the broader implications of these trade policies on both the US economy and its international relationships,” Fawad Razaqzada, market analyst at City Index, told The Guardian newspaper.
At the weekend, in a Fox News interview Trump was asked directly if he was expecting a recession, and his answer did not rule one out.
“I hate to predict things like that,” he said.
“There is a period of transition because what we’re doing is very big, we’re bringing wealth back to America. That’s a big thing. And there are always periods of — it takes a little time. It takes a little time.”
