In an address in Warsaw, Poland, European Commissioner for the Economy Valdis Dombrovskis revealed recent model simulations on the impact of U.S. tariffs, projecting a reduction in the U.S. GDP by 0.8% to 1.4% by 2027. In contrast, the EU is expected to experience a smaller impact, amounting to approximately 0.2% of its GDP.
Speaking after an informal meeting of eurozone finance ministers and prior to a European finance ministers’ gathering in the afternoon, Dombrovskis stated, “Should the tariffs become permanent or result in new countermeasures, the economic consequences could be more severe, potentially reducing U.S. GDP by 3.1% to 3.3%, EU GDP by 0.5% to 0.6%, and global GDP by 1.2%.”
Highlighting the consequences, he noted, “Global trade is projected to decrease by 7.7% over three years,” emphasizing one of the initial forecasts from Brussels regarding the current transatlantic trade tensions, which are based on a 25% tariff rate.
Dombrovskis cautioned that these simulations do not account for the potential additional erosion of investor and business confidence in the U.S. economy, which could further exacerbate the negative GDP impact.
Moreover, he acknowledged the extraordinary uncertainty and rapid decision-making changes, which impact the accuracy of these model simulations. However, they indicate a general trend that tariffs are detrimental to economic health and prosperity.
Earlier today, eurozone finance ministers examined the economic impact of the new U.S. tariffs amidst some relief following the U.S. announcement of a temporary suspension, a measure also adopted by the EU.
Macroeconomic forecasts are currently being influenced by the United States’ protectionist policies, including the imposition of steep tariffs on several trading blocs, such as the EU. This has provoked trade tensions, financial market instability, and concerns over economic slowdown and persistent inflation.
