When Donald Trump told reporters he could make the dollar “go up or down like a yo-yo”, he wasn’t just talking. The euro has now crossed 1.20 USD for the first time since 2021, and the American president seems pleased. For anyone living in France with investments, a mortgage, or simply a livret A (French savings account), this isn’t just political theater, it’s a direct hit to your wallet.
The “Formidable” Dollar Collapse
Trump’s reaction to the dollar’s 15% slide since his return? He called it “formidable.” While conventional economics treats currency stability as a virtue, Trump sees the greenback’s weakness as a weapon. A cheaper dollar makes American exports more competitive, pushes up import costs to encourage domestic production, and, perhaps most importantly, dilutes the real value of America’s massive debt pile.
The mechanics are simple: if you’re a French exporter selling wine or Airbus parts to the US, your revenues just shrank by 15% in euro terms. If you’re a French tourist planning a New York shopping trip, your purchasing power jumped by the same amount. The asymmetry explains why François Villeroy de Galhau, governor of the Banque de France (French central bank), watches this “with attention” while Trump celebrates.
French Exporters: The First Casualties
The pain hits hardest in sectors where France excels. Luxury goods, think LVMH and Kering, face a double whammy: not only does a strong euro make their products pricier for Americans, but Trump’s tariffs add another 15% on top. German car manufacturers suffer similarly, which matters because when Germany sneezes, France catches a cold through integrated supply chains.
John Plassard of Cité Gestion Private Bank calls it a “headwind for exporters, particularly automotive, machinery, and equipment goods.” The comment threads from French business forums reflect this frustration: many note that “Designed in California, Made in China” products like iPhones won’t see price cuts despite the dollar’s fall, while French companies must either absorb margin losses or lose market share.
The Hidden Tax on Your Purchasing Power
But it’s not all bad news for French residents. The same euro strength that hurts exporters benefits importers and consumers. Energy costs, priced in dollars, fall. That summer trip to California suddenly costs less. French families see their pouvoir d’achat (purchasing power) improve as imported goods from computers to coffee become cheaper.
This creates a strange paradox: your job might be at risk if you work in export manufacturing, but your vacation just got cheaper. The BCE (European Central Bank) faces a similar dilemma. A stronger euro imports deflation, potentially giving them room to cut rates further. For anyone with a crédit immobilier (mortgage) in France, that could mean lower borrowing costs ahead.
When the Fed Becomes a Political Football
Trump’s pressure on Jerome Powell and the Federal Reserve represents a bigger risk than the currency moves themselves. By openly campaigning for massive rate cuts and hinting at replacing Powell when his term ends in May, Trump undermines the institutional credibility that makes the dollar the world’s reserve currency.
French investors have seen this movie before. When institutions lose independence, currency volatility follows. The difference now is scale: the dollar underpins 60% of global reserves and 80% of global trade. As one analyst noted, “confidence in the dollar as the primary guarantor of security seems to have evaporated under Trump’s presidency.”
The Search for Dollar Alternatives
As the dollar weakens, French investors face a choice: accept the currency risk or seek alternatives. Gold has surged past $5,500 per ounce. Bitcoin flirted with $90,000. Even stablecoins, digital tokens pegged to traditional currencies, are gaining traction, with ten banks including BNP Paribas launching euro-denominated versions.
But here’s the catch: these “safe havens” come with their own volatility. Bitcoin still behaves like a risk asset in stress scenarios, and gold pays no dividends. For French residents maxing out their assurance-vie (life insurance wrapper account) and PEA, the practical question is whether to hedge currency exposure or simply accept it as part of global diversification.
Practical Steps for French Residents
What should you actually do? First, audit your exposure. If you own US stocks directly or through ETFs, calculate your dollar risk. A simple hedge through currency-hedged ETFs might cost 0.10% annually but could save you 15% in a year like this.
Second, consider your upcoming expenses. Planning a US trip? The strong euro makes now the time to book. Thinking of buying property in France? Dollar weakness won’t directly help, but if it leads to BCE rate cuts, your mortgage rate could benefit.
Third, don’t overreact. Currency swings reverse. The euro traded above 1.60 USD in 2008 before plunging. Trump’s “yo-yo” comment, while alarming, acknowledges this volatility. Your investment horizon matters more than daily exchange rates.
The Bigger Picture: A New Monetary Order?
François Villeroy de Galhau cautions against naivety: the euro won’t replace the dollar overnight. But each 1% shift in reserve currency allocation represents hundreds of billions moving across borders. If French and German institutions offer credible alternatives, the long-term trend favors diversification away from dollar dependence.
Trump’s strategy might boost US exports short-term, but at the cost of America’s “exorbitant privilege”, the ability to borrow cheaply in its own currency. For French investors, that means both opportunity and risk: opportunity to buy US assets cheaper, risk that the global financial architecture becomes less stable.
The smart move isn’t betting on Trump’s next tweet, but building a portfolio that can weather whatever currency regime emerges. In France, that means maximizing your PEA and assurance-vie first, then thinking globally with eyes wide open to currency reality.
Your euro is stronger today. Whether that lasts depends less on economics than on whether Trump decides his yo-yo needs to come back up.
