Trump Trade War: Tariff Threats Against Europe Shake EUR/USD and GBP/USD

The Trump Trade War is back in the news when President Donald Trump provided new tariff threats. Donald Trump has suggested 10% tariffs from beginning of February on goods in eight countries in Europe. These countries include major economies such as Germany, France, and UK. In case no agreement is achieved regarding Greenland by June 1, the tariffs would increase to 25%. It is one of the most hostile trading actions against such allies in recent times.

Europe Prepares to Respond

These tariff threats were met with swift response by European leaders. The President of France, Emmanuel Macron summoned an urgent EU meeting. The bloc is currently contemplating using its “anti-coercion” tool or the trade bazooka. This enables EU to retaliate through actions such as banning exportation or restricting access of American firms to the European market. The EU also considered reinstating retaliatory tariffs worth €93 billion.

These threats come at weak moment as Europe remains economically tied to U.S. through trade and defence. According to some reports certain leaders of EU feel that Trump has overstepped a boundary. But others view this as a dangerous repeat of past trade tensions.

Economic Impact: Uncertainty and Slowdown

The aftershocks of these threats can already be felt. In 2025, many U.S. companies put freeze on hiring new staff until there was clarity on tariffs. Carsten Brzeski of ING observed that these new measures would reduce European GDP by 0.25% this year.

In 2024, the U.S. had trade relations with Germany with $236 billion. The major trade volumes include trades with UK and Netherlands. The action of Trump can also impact US-EU relations and trade agreements. The president of European People’s Party Manfred Weber stated that approval of trade deal is not possible at this stage.

EUR/USD Reaction: Vulnerability Ahead

The euro is feeling the pressure as markets respond to tariff headlines. The insecurity surrounding the growth of EU and threat of a disruption in trade have been a burden on EUR/USD pair.

U.S. dollar has taken refuge following safe haven flows and better domestic statistics. However, when the American economy is also slowing due to retaliation from rest of the world, then the dollar will also lose its momentum.

From technical point of view, EUR/USD is consolidating between levels of 1.148 and 1.19. However, the pair has tested the 200 SMA and started to bounce back from solid support. A break of either level will define the next move, but the overall price structure is still bullish.

This bullish structure is observed with a rounding bottom pattern formation and a breakout above 1.12. This structure in the pair is fueled by extremely bearish price structure in U.S. Dollar Index. A break above 1.19 could add a strong rally in EUR/USD.

GBP/USD Outlook: Weakness Returns

The British pound also faces these risks. The UK is among eight countries mentioned directly in the list of tariffs introduced by President Trump. This exerts additional pressure on GBP/USD, with political tensions still being intense in Britain itself.

From technical point of view, GBP/USD is trading below the 1.35 to 1.3550 level of resistance. This resistance is marked by a descending trend line from July 2025 highs. However, the pair is still above the 50-day SMA and a break above 1.35 could lead to a strong rally. On the other hand, any break below 1.3180 could add new selling pressure. The RSI shows that the pair is consolidating around mid-level, which adds uncertainty to GBP market.

Final Words

The Trump Trade War has brought uncertainty back into the global markets and put pressure on major European currencies. Tariff threats against key allies increase risks to growth, trade and investor confidence in Europe and UK. This environment is keeping EUR/USD and GBP/USD sensitive to political headlines and policy responses. The technical structures are still constructive, but the volatility is likely to remain elevated as negotiations take place. The currency markets will keep reacting sharply to trade developments and shifting sentiment.

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