Does the EU even want a strong euro?

What It Covers

Federal Reserve Chair Jerome Powell holds rates steady amid economic strength and tariff-driven inflation concerns. The euro hits $1.20, threatening European exports and complicating ECB policy. Consumer confidence drops to 12-year lows, with Gen X showing the sharpest decline. Small businesses struggle with tariff uncertainty and supply chain disruptions while awaiting Supreme Court decisions.

Key Questions Answered

• •Currency Impact on Exports: When the euro appreciates to $1.20, European products become more expensive in US markets, directly threatening Germany's economy where exports represent 47-50% of GDP compared to just 10-15% for the United States. This currency strength undermines Germany's fiscal stimulus efforts designed to boost internal growth and defense spending, requiring the European Central Bank to potentially lower rates if export demand weakens further.
• •Tariff-Driven Price Volatility: Small retailers face doubled workloads managing constant price changes as tariffs shift. Bruised Boutique Skate Shop took a $100,000 Small Business Association loan to stay afloat and now holds inventory purchases until Supreme Court clarity arrives. Canadian maple skateboard prices fluctuate continuously, creating cascading supply chain issues as both retailers and vendors delay purchasing decisions, compounding inventory shortages throughout distribution networks.
• •Consumer Confidence Age Gap: January 2025 consumer confidence fell to May 2014 levels, with Americans over 35 showing significantly lower confidence than those under 35. Older consumers compare current prices to historical baselines spanning decades, creating persistent negative sentiment despite wage growth keeping pace with inflation. This matters because consumption drives 75% of the economy, and pessimistic Gen X consumers are in peak earning and spending years.
• •Chocolate Tariff Lag Effect: Dean's Sweets in Portland demonstrates how tariff impacts persist long after removal. Despite cocoa tariffs ending mid-November 2024, current production uses chocolate purchased during the tariff period, meaning businesses continue absorbing higher costs months later. Price resistance from customers now appears alongside ongoing supply availability issues, with suppliers unable to predict chocolate availability even one month ahead.
• •AI Network Infrastructure Bottlenecks: AWS deploys 800-gigabit generation products and 64-fiber single connectors that reduce data center deployment time by 54% compared to individual 16-32 port connections. Amazon issued $15 billion in bonds while cutting 16,000 corporate jobs to focus on AI infrastructure. Network reliability becomes critical as AI integration expands—past AWS outages disrupted college textbooks and smart beds, signaling potential economy-wide vulnerabilities.