The Dollar Isn’t Rushing Back. Forecast as of 07.08.2025
High labor costs, ongoing uncertainty around US trade policy, and tariffs that aren’t high enough are discouraging companies from returning to America. Let’s discuss it and make a trading plan for EUR/USD.
The article covers the following subjects:
Major Takeaways
- US import duties have jumped from 2.3% to 18%.
- Washington is making exceptions to tariffs.
- The Fed is prepared to cut rates soon.
- Building up EURUSD longs from 1.155 and 1.16 remains relevant.
Weekly Fundamental Forecast for Dollar
Donald Trump promised to bring manufacturing back and revive the American Golden Age. However, activity in the manufacturing sector shrank between March and July. Companies aren’t rushing to set up plants in the US, while tariffs are increasing economic slowdown risks and the potential for renewed Fed policy easing. All of this supports EURUSD growth.
One reason the revival of the “Golden Age” is stalling is that tariffs aren’t high enough. While the average rate has surged from 2.3% to nearly 18%, that’s not enough to convince companies to return to the US. Industries with lower labor costs — like textiles — are more likely to return. Automakers and steel producers would need an additional boost: a weaker dollar.
US Tariff Rates
Source: Bloomberg.
Trade policy uncertainty is another major obstacle. While official rates have been announced, behind the scenes, the EU, Japan, and other countries are lobbying for exemptions for key sectors and exporters. And Washington is compromising.
The US announced a 50% tariff on Brazilian imports, but excluded planes, orange juice, some metals, and fuel. These exemptions cover 694 products, or 43% of Brazil’s exports. Chile received similar treatment — an exemption from the 50% copper tariff. The country accounts for about 65% of all refined copper imported into the United States.
Donald Trump also introduced 100% tariffs on semiconductors, but granted exemptions to firms investing in the United States. Result: no major supply chain disruption. So what kind of manufacturing comeback can we talk about here?
Pledged Investments in the US Economy
Source: Bloomberg.
One thing’s clear: Donald Trump loves money — from tariffs, from investment, from anywhere. But will his policies keep the US out of a recession? According to FOMC member Lisa Cook, the latest jobs report could mark a turning point. Historically, such revisions are warning signs of economic cooling. Minneapolis Fed President Neel Kashkari and San Francisco Fed President Mary Daly are urging swift rate cuts to avoid a sharp GDP drop.
Weekly Trading Plan for EURUSD
Futures markets now price in a 95% probability of a Fed rate cut in September and at least two more cuts by the end of 2025. Meanwhile, Goldman Sachs believes the ECB has already completed its easing cycle. This divergence justifies building up EURUSD longs opened from 1.155 and 1.16.
This forecast is based on the analysis of fundamental factors. It considers official statements by financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also taken into account.
Price chart of EURUSD in real time mode
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