The euro's got a Trump problem going into next year - ForexLive

As the US and China look to wrap up the Phase One trade deal, the European Union has got to watch its back next

ForexLive

Although Trump may be largely preoccupied with the US election next year, the temporary ceasefire in US-China trade relations will free up some of his time to focus on other agendas - at least during the early portions of next year.

As such, one key issue that he has yet to seriously address or escalate is the supposed "trade imbalance" that the US has with the European Union. This is something that he has been going on about for quite some time now already:

But that's just the smaller part of the equation. The biggest offender of this "trade imbalance" is not France, but Germany instead.

Germany sits among the top four nations that the US has the largest trade deficit with, and now that Trump has addressed the trade situation with the other three nations (China, Mexico, Japan), they will be up on the chopping board next.

As such, if Trump starts to deal with the European Union in the same way that we have seen the US-China trade war develop, this could arguably be one of the major risk factors for the euro and euro area assets as we look towards next year.

With the German economy barely staying afloat this year, a trade war is the last thing that the country needs. Hence, any nascent signs of an economic recovery may be offset against the backdrop of a looming trade war that could turn even uglier as the year goes by.

Given such a development, it would be hard for the euro to keep a more optimistic tone as this will also take away a key potential tailwind for the single currency in 2020.

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December 18, 2019 at 07:24PM
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The euro's got a Trump problem going into next year - ForexLive
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