In 2025, Americans traveling to Europe may discover deals.

• For decades, the euro has been stronger than the U.S. dollar, making it expensive for Americans to buy goods in most European countries.
• The euro is predicted to reach or fall below the U.S. dollar's value in 2025, resulting in a 1:1 exchange rate for the currencies.
• The expectation is due partly to tariff policies anticipated under President-elect Donald Trump.

Americans traveling to Europe next year may be in store for some bargains.

In recent weeks, the euro has weakened against the U.S. dollar and is predicted to continue falling in 2025 and possibly into 2026, according to economists.

According to Brendan McKenna, an international economist at Wells Fargo Economics, American tourists traveling abroad in Europe will benefit from a significant increase in their purchasing power.

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For decades, travelers have found it more expensive to purchase goods and services priced in euros because the euro has generally been stronger than the dollar.

According to economists, the anticipated policies under President-elect Donald Trump's incoming administration, such as tariffs, and other economic dynamics are expected to strengthen the U.S. dollar and weaken the euro.

Euro is expected to hit parity with the dollar

If the euro falls to or below parity with the U.S. dollar next year, it will mean the currencies have a 1:1 exchange rate.

In the European Union, 20 out of the 27 countries use the euro: Austria, Belgium, Croatia, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.

In 2022, the currency reached parity with the dollar for the first time in two decades, but then rebounded.

James Reilly, senior markets economist at Capital Economics, wrote in a research note on November 11 that euro parity is "back on the cards."

In the aftermath of Trump's victory, the euro has endured more hardship than other currencies, and we anticipate this trend to persist.

At 10 a.m. ET on Friday, 1 euro was worth approximately $1.06, a decrease of about 3% from its value of $1.09 at market close on Election Day.

The ICE U.S. Dollar Index has been on a winning streak for eight straight weeks, an "extreme run" that has only occurred three times since 2000, according to Reilly.

By delaying a purchase until next year, travelers can potentially benefit from currency fluctuations. For instance, booking a European hotel or tour for 2025 but paying later allows you to defer the expense, although it's important to note that this is not a guarantee that the euro will continue to weaken against the dollar.

Tariffs, interest rates and a strong economy

Euro-USD currency fluctuations are significantly impacted by tariffs and trade policy, according to economists.

Trump has floated broad tariffs on global trading partners.

He announced on the campaign trail that he would impose tariffs of 10% or 20% on all imports, including those from the European Union. On Monday, he pledged to add a 10% tariff on China and 25% tariffs on all products from Canada and Mexico on his first day in office, indicating his intention to implement import taxes.

The ultimate scope and magnitude of tariff policy are unclear, however.

The imposition of tariffs on Europe may decrease its exports, resulting in a weakened economy and a depreciation of the euro, according to economists.

The interest-rate differential between the U.S. and eurozone is expected to widen due to the impact of tariffs, according to economists.

According to Reilly, tariffs are predicted to increase inflation in the U.S. Since these taxes are borne by U.S. businesses, they often pass the additional expenses onto consumers.

Officials from the U.S. Federal Reserve may maintain high interest rates for an extended period to control inflation, while experts predict the European Central Bank will continue to lower rates.

The ECB may cut rates further if tariffs on the eurozone are implemented, which would create a widening rate differential that significantly favors the dollar, according to McKenna of Wells Fargo.

There are other factors, too.

Despite expectations, the U.S. economy has performed better than expected over the past year or two, in contrast with Europe, according to Reilly.

Also, financial markets dislike uncertainty, McKenna said.

If uncertainty about Trump administration policies causes markets to be unsettled in the short term, investors will likely seek out safe-haven assets denominated in U.S. dollars, such as U.S. Treasury bonds, thereby strengthening the dollar, according to McKenna.

There is a possibility that Europe may respond with tariffs or increase certain consumer prices, such as airfares, in retaliation to American actions, according to Reilly.

"He stated that he believes Europe desires the maximum amount of free trade possible."