The value of the euro is sliding — big-time. The currency is nearly the same value as the US dollar: one to one.
This significant change is good news for Americans planning a European holiday who will enjoy up to 15% in discounts.
But economist Eswar Prasad, a trade policy professor at Cornell Univeristy, told The World's host Marco Werman that this could have a big impact on the US trade deficit.
Americans will see cheaper prices on those coveted imports — a great deal on a Spanish bottle of wine, for example — which helps to moderate inflation, Prasad said. But ultimately, other forces at work are driving up inflation. Europeans visiting the US will feel that pain — detering tourists from visiting the US.
"It also means that it's going to be much harder for American exporters to sell their goods in Europe and elsewhere because now, those exports have gotten a lot more expensive for people in the rest of the world because they have to pay more ... for those imports from America," Prasad said.
The US will likely import more and export less from other parts of the world in the coming months.
Prassad said that soaring inflation and tightening interest rates suggests that a recession may be on the horizon. But it's not just a matter of whether an economy goes into recession, it's about the timing of it compared to other economies.
When it comes to currency, Prasad said, the US economy will still be doing somewhat better than the Euro zone.
"Even if the US were to go into recession, you might see the euro continuing to slide because it might mean that the euro economy is even weaker than that of the US," Prasad said.
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