Trump plans to impose 15% tariffs on EU goods, leading to strong warnings of retaliation from the bloc.
by VT Markets
/
Jul 21, 2025
U.S. officials have told the EU’s trade chief that President Trump might ask for more concessions in ongoing trade talks. He is considering increasing the proposed tariff on most European goods from 10% to 15% or more.
This surprising shift has caught EU negotiators off guard, leading to a stronger response from the EU. Germany, which had previously favored a milder approach, is now aligning with France’s tougher stance. With a deadline of August 1 approaching, EU member states are pushing the European Commission to prepare firm counteractions against U.S. companies if talks do not succeed.
The Eur Usd Currency Pair
The EUR/USD currency pair has been stable at the beginning of the week.
We think the current calm in EUR/USD is misleading and offers a great opportunity. One-month implied volatility for the pair is low at around 6%. This does not account for the significant risk posed by the upcoming August deadline. Traders should look into buying this low volatility with strategies like straddles, which can benefit from a potential sharp move once the results of the talks are clear.
The tougher stance from Germany is significant, as the U.S. was its largest export partner in 2023, with goods worth over €155 billion. This heavy reliance makes German-focused indices like the DAX especially sensitive to the proposed 15% tariff. We recommend buying put options on European automotive and industrial stocks, a tactic that worked well during the U.S.-China trade tensions in 2018.
Market Volatility Concerns
This uncertainty affects more than just currency markets, yet the CBOE Volatility Index (VIX) remains low, around 13. This indicates that the market may not be fully accounting for the risk of a new trade conflict with the EU, an economy similar in size to the U.S. Holding long VIX futures or call options can serve as a smart protection against potential shocks from retaliation against major U.S. companies.
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by VT Markets
Jul 21, 2025
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