Over the past year, the U.S. dollar has fallen by around 10–15 percent against the euro, in part due to deliberate protectionist policies from the Donald Trump administration. It has also reached the lowest point against a wider range of currencies since 2017.

Swedbank chief economist Tõnu Mertsina said the strengthening euro, relative to the dollar, diminishes the competitiveness of European exports.

"If we are now talking about the dollar weakening against the euro, then the flip side of that is that the euro will get stronger. This strengthening of the euro in itself means that the competitiveness of goods exports gradually deteriorates," Mertsina said.

Bank of Estonia (Eesti Pank) economist Peeter Luikmel explained the logic of Trump's desire to see a weaker currency in more detail.

"A weaker dollar for Donald Trump primarily means more expensive imports into the U.S. economy, which will mean that goods coming from abroad get more expensive for the U.S. consumer and, consequently, domestic U.S. producers should in theory benefit," Luikmel said.

The falling dollar will also bring a positive consequence to Europe, however, since many commodities, including crude oil, are quoted in dollars on the global market. A stronger euro will render these cheaper for Europe.

Having said that, while the average consumer may often expect a fall in the dollar will translate to a significant drop in prices at the filling station pumps, according to Luikmel, these gains will only be modest, including after factoring in domestic excise duties.

"A roughly 10 percent fall in the dollar exchange rate may perhaps provide some moral relief in fuel prices for us, in the sense that the impact of excise duties may not seem so great, but we are still talking in terms of cents on the display that greets you at the pump," Luikmel said.

A weaker dollar should also help with managing inflation, in Estonia and in Europe more broadly.

"An indirect effect through our euro area trading partner like this will indeed also affect Estonia in the direction that it should help curb inflation," Mertsina went on.

While exchange rate changes to major world currencies attract plenty of media attention, the current fluctuations remain normal in historical terms in any case, current U.S. administration notwithstanding, Luikmel noted. "Essentially, fluctuations around one dollar to one euro, of plus or minus 20 percent, which have also been seen before in relatively ordinary and calm times, have not as of today exceeded the limits that we have seen in the U.S. even under considerably more placid administrations," Luikmel said.

Trump has also threatened tariffs as high as 25 percent on the import of European goods following the controversy around Greenland's future, though most recently climbed down from this. Tariff announcements themselves, particularly last spring's "Liberation Day" tariffs, have been a major factor in the fall of the dollar, the BBC reports.

In 2025 the dollar index, which tracks the currency against a basket of other currencies, went down by nearly 10 percent, its worst performance since 2017. This has continued in the first month of 2026, with the dollar sinking on Tuesday to a four-year low, hitting multi-year lows versus the euro and the pound after losing about 3 percent in a week, and a four-year low against the basket of currencies. Analysts say the trend is unlikely to be over soon, despite a brief slowdown.

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