Will Trump Destroy Euro?

Last week, Trump attacked Germany via his advisor for monetary matters P. Navarro.

P. Navarro claimed the euro is undervalued and that Germany is exploiting USA and rest of the EU thanks to that. Let’s remind us that American diplomat stated on Tuesday that he is expecting depreciation of euro and possible disintegration of EU – and the USA is saying today that euro is too weak and that Germany is abusing its position in EU. Understandably the speculators are a little bit confused by that. (And so we would add to it lets remind us that it is exactly Germany which as the only one in the Eurozone is pushing on ECB to stop pumping the money into the economy and depreciating euro by that.)

While according to the USA the exchange rate is in favour of Germany it is destroying south of Europe. “German” euro is undervalued by 17 % while “French one” is overvalued by 5 %. So the France is losing while the Germany is gaining. The Americans are documenting it on fact that Germany has the lowest unemployment rate since the year 1990. So the USA is basically stirring a tension inside the Eurozone. And the worst is that they are right: Weak euro is truly demonstrably helping Germany and hurting the south – although it is the Germany standing against the politics of ECB but it is supported by the south! (Is it sufficiently complicated now?)

Could the USA be playing the American card even against the EU at the end? They are “only” saying today that the Mexicans are taking jobs from the Americans so they need to build a wall on the borders. Could we perhaps expect to hear that even Germans are taking jobs from the Americans? Besides, Germany is exporting to the USA more than to France. And that understandably can be explained by for example the fact that the exchange rate is supporting German export. Trump has been stating already before the elections that countries which have artificially undervalued currencies will be hit by the new duty in the sum of undervalued currency. So by this logic could purely hypothetically and improbably (because of Germany) the Eurozone reach new duty of 17 % and the Czech Republic because of the politics of CNB of 10 %...

And so it would be extra-super complicated we need to add that nobody (except the market itself) can determine the amount of undervaluation, various models give various answers so we can basically make up any duty and nobody can disprove its amount. Either way, it is definitely something which won’t help the global growth – not even in central Europe – at all.