Trump Trade War: EUR/USD Reacts to Tariff Uncertainty and Mounting China Trade Tensions

Trump’s 30% Tariff Threat on EU Imports Puts Pressure on EUR/USD

The euro faces renewed downside risks as trade tensions between the US and Europe intensify. President Trump threatened a 30% tariff on EU imports starting 1 August. The European Union has already prepared tariffs worth 21 billion euros ($24.52 billion) in retaliation. Italy’s Foreign Minister Antonio Tajani warned that a second round of tariffs could follow if negotiations fail. Despite this, the EU extended its suspension of countermeasures until early August.

Tajani urged the European Central Bank to revive quantitative easing and lower interest rates. His remarks reflect growing concern over economic weakness in the eurozone.

Moreover, German Chancellor Friedrich Merz pledged to work with France and the European Commission to resolve the conflict. EURUSD remains volatile as markets assess the likelihood of a trade deal before the August deadline. Any escalation could weaken the euro further, especially if the ECB signals more easing in response to trade-related shocks.

Trade Uncertainty Drives USDCNH Volatility Ahead of August Deadline

The chart below shows that China’s exports increased by 5.8% YoY in June. This growth beats the forecasts of 5.0% and May’s growth of 4.8%. On the other hand, the imports rebounded by 1.1%, following a 3.4% drop in May.

Moreover, the trade surplus increased to $114.7 billion from $103.22 billion in May, as shown in the chart below. These figures reflect a surge in shipments ahead of the 12 August tariff deadline.

Businesses rushed to capitalise on a fragile truce between Washington and Beijing. However, the outlook remains clouded by President Trump’s global trade crackdown. A new 40% tariff on transhipments through Vietnam may hit Chinese firms rerouting goods to avoid US duties. Trump also floated a 10% charge on imports from BRICS nations, further pressuring Beijing.

Despite recent easing in US-China export controls, risks remain high. China’s rare earths exports increased 32% in June, suggesting improved trade flows. However, the uncertainty remains high.

Trump Trade War Drives EUR/USD Bullish Breakout

EUR/USD Breaks Key Resistance at 1.12 Level

The long-term chart for EUR/USD shows a breakout above the key pivotal level near the 1.12 level. This breakout has pushed the pair into a higher trend. An inside bar that formed in May 2025 signalled price compression, which triggered the next leg upward.

The recent correction from the 1.177 level in EUR/USD followed the announcement of new tariffs and reflects increased market volatility. However, the broader trend remains strongly bullish. The breakout from the falling wedge pattern has confirmed a long-term upward move.

The target of this falling wedge pattern lies near the 1.22 level. A clear break above the 1.22 level will likely drive EUR/USD to much higher levels. This breakout signals a strong bullish phase in the euro.

Bullish Cup Pattern and SMA Crossover Signal Strong Uptrend

The daily chart for EUR/USD shows that the trend remains strongly bullish after forming a cup pattern near the 1.02 level. The breakout at the 1.12 level pushed the pair to much higher levels.

Strong support now lies around the 1.15 zone, where the current correction may find a base before resuming the upward move. Moreover, the 50-day SMA trading above the 200-day SMA confirms strong bullish momentum.

USD/CNH Volatility Surges as US-China Trade Tensions Escalate

USD/CNH Bullish Pattern Holds Despite Recent Correction

The ongoing trade crisis between China and the US has created strong price volatility in the USD/CNH pair. The pair failed to break above the 7.35 level and has since entered a sharp correction.

However, the broader Trump-era pattern remains strongly bullish. A pullback toward the 7.15 level is likely to result in a strong rebound back to the 7.35 level. A breakout above 7.35 level may take the pair toward the 7.50 level.

Key Levels for USD/CNH

Strong volatility is also visible on the daily chart of USD/CNH. The pair failed to break above the 7.3660 level, which pushed the price down to the support area near the 7.15 level.

As long as this support holds, a rebound toward the 7.30 level may develop. A breakout above the 7.25 level could lead the pair back to the 7.3660 level. A clear break above 7.3660 may open the path to higher levels.