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The transatlantic trade-dependent Euro Area is prepping for Donald Trump’s second term and the return of higher tariffs.
US tariffs may lower Euro Area GDP by 0.4%, the Institute of International Finance (IIF) estimated in a Monday note. With many European countries yet to fully recover from the pandemic and increased competition from China, renewed tariffs could lead to a “substantial economic hit,” the report adds.
Among the countries most likely to be impacted are Germany, France and Italy. Machinery and industrial goods exports from Italy and Germany are expected to be hit especially hard by new policies. Germany, the US’s largest exporter, also heads into its second straight year of zero growth. France could see exports of goods in the aerospace and luxury industries decline by as much as 4% over Trump’s next term, according to the IIF.
But, as a new tariff scenario chart from Bloomberg Economics points out, Trump’s statements, which often shake global currencies, come much faster than the tariff policies themselves. Those could take weeks if not months, depending on how liberally Trump plans to take advantage of the International Emergency Economic Powers Act.
Aside from timing, there’s also likely to be a discrepancy between Trump’s threats and what actually happens (during his first term, Trump walked back his initial proposed tariff on Mexico after the country agreed to increase border patrol).
We’ll be watching as policies unfold, and as the next administration continues to tease its plans (I’d keep an eye on Truth Social).
