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Euro drops as Trump threatens 50 percent tariff on EU
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A woman holds euro banknotes in this illustration photo taken on May 30, 2022. (Reuters/Dado Ruvic)
T
he euro fell on Friday, reversing earlier gains after US President Donald Trump said he would recommend hitting the European Union with 50 percent tariffs from June 1, reigniting investor fears over the impact of duties on the world economy and trade.
In a post on his Truth Social platform, Trump said the EU was "very difficult to deal with" and "our negotiations with them are going nowhere."
"Therefore, I am recommending a straight 50% Tariff on the European Union, starting on June 1, 2025. There is no Tariff if the product is built or manufactured in the United States."
The euro had risen by almost 0.8 percent on the day earlier, after Trump in a separate post threatened to impose a 25 percent tariff on Apple on all iPhones not made in the United States. It was last up 0.45 percent at $1.1336.
The dollar pared some losses against the Japanese yen and the pound after Trump's post on EU tariffs but was still heading for its first weekly drop against a basket of currencies in five weeks.
After Moody's last week downgraded its US debt ratings, investor attention this week has honed in on the country's $36 trillion debt pile and Trump's tax bill, which could add trillions of dollars more to it.
Dubbed by Trump as a "big, beautiful bill", it narrowly passed the Republican-controlled US House of Representatives and now heads to the Senate for what is likely to be weeks of debate, keeping investor sentiment fragile in the near term.
After the US and China agreed earlier this month to suspend their reciprocal tariffs, investor focus has returned to vulnerabilities in US government finances.
Trump's posts on Friday brought tariffs and trade roaring back to the fore.
"The focus had very much been on the US fiscal position following the passage of Trump's 'big beautiful bill'. But this has swung attention firmly back to trade tariffs. It's more bad news for the US dollar, bringing 2025 lows into focus. I think it does nothing to help avert the 'sell America'," City Index strategist Fiona Cincotta said.
The yen, which has served as a safe haven for investors seeking alternatives to the dollar, strengthened, leaving the dollar down nearly 1 percent at 142.52.
The Japanese currency got a boost earlier from data showing Japan's core inflation accelerated at its fastest annual pace in more than two years in April, raising the odds of another interest rate hike by year-end.
The data underscores the quandary facing the Bank of Japan, which must grapple with price pressures from persistent food inflation as well as economic headwinds from Trump's tariffs.
Super-long Japanese government bonds have also scaled record highs this week, although they were steady on Friday.
The Swiss franc also rallied, pushing the dollar down 0.7 percent to 0.8225 francs.
