Goldman Sachs: Euro could fall if Trump is re-elected

Goldman Sachs bank predicts the euro could fall 10% if former US President Donald Trump's tax proposals are implemented.

According to Reuters, Republican presidential candidate Donald Trump is in a tight race with Democratic Vice President Kamala Harris ahead of the official election less than 2 weeks away. Although both candidates propose strong tax policies, Trump's drastic economic policies will have a stronger impact on Europe, an important trading partner of the US and China, according to analysis by Goldman Sachs. Goldman said the scenario of the Republican Party winning both the presidency and Congress could lead to increased import taxes and domestic tax cuts to stimulate growth again for the weakened economy . According to analyst Michael Cahill of Goldman Sachs, if the US imposes a 10% tax on all imports, 20% on Chinese goods only, combined with domestic tax cuts, the USD price will increase sharply. Meanwhile, the euro price decreased by 8-10%. Currently, the euro is trading at 1,082 USD . The last time the euro was equal to the dollar was in November 2022.

EUR/USD exchange rate developments over the past year. Source: Reuters.

Both measures are likely to push up inflation, which would make US interest rates significantly higher than in Europe, increasing the attractiveness of the US dollar.

"We expect the dollar to react most strongly if Republicans win all seats, increasing the chances of raising import tariffs and cutting domestic taxes," Goldman Sachs said in a report. If Trump imposes more tariffs on China, the euro could fall by about 3%. "However, if Democrats take the White House and Congress , or just the Senate or House, the dollar could still depreciate slightly as markets adjust to the tariff outlook," Goldman Sachs said. The euro had fallen 2.7% in October as the US economy gradually "overtook" Europe, while some investors bet on higher import tariffs if Trump won the US election.

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