Key Moments
- EUR/USD has traded mostly sideways as markets digest the US Supreme Court ruling on tariffs and the introduction of replacement levies.
- New US baseline tariffs of 10-15% leave average effective tariff rates only marginally lower than under the previous IEEPA framework, according to cited estimates.
- Nordea sees no need to adjust its ECB outlook, maintaining a forecast of no rate changes this year despite tariff-related uncertainty.
Stable FX Reaction to Tariff Developments
Nordea’s Jan von Gerich observes that EUR/USD has been trading in a relatively narrow range as investors absorb the implications of the US Supreme Court decision on tariffs and the subsequent introduction of new baseline levies. He highlights that the currency pair has shown limited directional movement, reflecting a broadly contained response in foreign exchange markets.
According to von Gerich, the implementation of new US baseline tariffs in the 10-15% range results in average effective tariff levels that are only slightly below those associated with the earlier IEEPA-based measures. On this basis, he concludes that the overall policy shift does not materially alter the macro or market backdrop.
Market Moves and Tariff Structure
Von Gerich characterizes recent market dynamics as generally subdued.
“The market action over the past week has been far from spectacular. Long bond yields have crept somewhat lower, EUR/USD has moved largely sideways, while speculation on the probable impact of AI on different sectors has caused some swings in the equity market.”
He points to external analysis in evaluating the new tariff regime:
“Assuming the new rate rises to 15%, the average effective tariff rate will fall only by a few percentage points compared with the IEEPA tariffs, according to estimates by the Yale Budget Lab.”
Von Gerich notes that investors have taken the legal and policy shifts in stride.
“The market reaction to the court decision was rather muted, suggesting that the outlook has not changed materially.”
Based on this response, he emphasizes that current baselines for growth, inflation, and markets remain broadly appropriate.
“It would thus be premature to make any major changes to economic or market forecasts.”
Implications for the Euro Area and ECB Outlook
Von Gerich acknowledges that the revised US tariff setup introduces additional uncertainty for the euro-area economy, but he stresses that the scale of the shock may be manageable.
“In the euro area, the recent tariff changes present some downside risks given increased uncertainty, but the impact could prove to be limited. After all, also the euro-area economy defied the more negative forecasts last year when tariff uncertainty was at its highest.”
In this context, Nordea maintains its existing view on European Central Bank policy.
“We remain comfortable with our ECB forecast of there being no rate moves this year as recent data raise hopes that also the manufacturing sector is gradually doing better.”
Snapshot of Key Elements
| Topic | Detail |
|---|---|
| EUR/USD behavior | Traded largely sideways as markets assessed tariff-related developments |
| New US baseline tariffs | Set in the 10-15% range, leaving average effective rates only slightly lower than under IEEPA tariffs |
| Market reaction | Described as muted, with no significant change to the broader outlook |
| Euro-area impact | Downside risks from uncertainty, but potential overall effect seen as limited |
| ECB policy view | Nordea expects no rate moves this year, supported by improving manufacturing data |
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