EUR/JPY Plummets to Around 161.00 Amid Trump’s 50% Tariff Threat on Eurozone

Trump’s Tariff Threat Triggers Euro Decline

The EUR/JPY pair dropped sharply to near 161.00, a one-month low, during North American trading on Friday, May 23, 2025, driven by a weakening Euro (EUR). The slide followed a post by U.S. President Donald Trump on Truth.Social, where he threatened to impose a 50% tariff on European Union (EU) imports starting June 1, 2025, unless products are manufactured in the U.S. Trump’s statement came after late European trading hours, criticizing the EU’s trade proposal as inadequate and accusing Brussels of failing to negotiate effectively. This escalation in U.S.-EU trade tensions has significantly eroded demand for the Euro, given that EU exports to the U.S. in 2024 were nearly double its imports, according to the Office of the U.S. Trade Representative.

ECB Rate Cut Expectations Add Pressure

Further weighing on the Euro, market expectations are mounting for the European Central Bank (ECB) to cut interest rates at its June 2025 meeting. Investors anticipate a dovish shift in monetary policy, which has compounded the currency’s weakness against major counterparts. The combination of looming trade tariffs and anticipated ECB easing has created a challenging environment for the Euro, contributing to the EUR/JPY pair’s decline.

Japanese Yen Gains on Strong Inflation Data

On the Japanese side, the Yen (JPY) has strengthened against most currencies, except antipodean peers, bolstered by hotter-than-expected National Consumer Price Index (CPI) data for April, released earlier on Friday. Japan’s core CPI, excluding fresh food, surged to 3.6%, surpassing forecasts of 3.4% and March’s 3.2%. This robust inflation figure has fueled speculation that the Bank of Japan (BoJ) may adopt a more hawkish stance, supporting the Yen’s outperformance and adding downward pressure on the EUR/JPY pair.

U.S.-EU Trade Tensions Intensify

U.S. Treasury Secretary Scott Bessent escalated the rhetoric, stating in a recent interview that the EU is “not negotiating in good faith.” The sharp imbalance in U.S.-EU trade, coupled with Trump’s tariff threat, underscores the potential economic fallout for the Eurozone. Analysts warn that a 50% tariff could disrupt Eurozone exports, further weakening the Euro and impacting the EUR/JPY pair’s trajectory in the near term.