EUR/CAD holds ground near 1.6150 due to EU efforts to deter Trump tariffs
- EUR/JPY is supported as the Euro strengthens on EU efforts to deter US tariffs.
- Trump announced a 10% tariff on select European countries, effective February 1, over the Greenland dispute.
- The commodity-linked Canadian Dollar struggles as Oil prices pare daily gains.
EUR/CAD extends its gains for the second successive session, trading around 1.6150 during the European hours on Monday. The currency cross is supported as the Euro (EUR) strengthens after EU ambassadors agreed on Sunday to intensify efforts to deter US President Donald Trump from imposing tariffs on European allies, while also preparing retaliatory measures should the duties move forward.
On Saturday, US President Donald Trump said that he would impose tariffs on eight European countries opposing his proposal to acquire Greenland. Trump stated that a 10% tariff would be levied on goods from EU members Denmark, Sweden, France, Germany, the Netherlands, and Finland, as well as Britain and Norway, effective February 1, until the US is permitted to purchase Greenland, per Bloomberg.
The EUR/CAD cross also appreciates as the commodity-linked Canadian Dollar (CAD) struggles against the Euro after Oil prices pare daily gains. West Texas Intermediate (WTI) Oil price is trading around $59.00 per barrel at the time of writing.
Crude Oil prices have lost ground amid easing tensions with Iran, reducing concerns over potential supply disruptions. Market anxiety subsided after US President Donald Trump signaled last week that he may delay any military action, following Iran’s pledge not to carry out executions of protesters. However, Trump warned that forceful measures could still be taken if executions resume, leaving some geopolitical risk premium priced into the market.
However, Oil prices remain in the positive territory, supported by China’s key economic data. China’s industrial production rose 5.2% year-over-year YoY in December, accelerating from 4.8% in November, supported by resilient export-driven manufacturing activity. China’s GDP expanded 1.2% QoQ in Q4 2025, up from 1.1% in Q3 and above the 1.0% consensus. On a YoY basis, growth eased to 4.5% from 4.8% but exceeded expectations of 4.4%.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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