An analysis by Xtb reveals that the potential impact on the EU’s GDP is “significant, but not catastrophic,” with estimates from various institutions ranging between 0.3% to 1.2%, depending on the scenario.
Bloomberg Economics estimates that 10% tariffs would reduce the Eurozone’s GDP by about 0.3%, and introducing 30% tariffs could double this effect. Meanwhile, economists from Goldman Sachs project that if the 30% tariffs persist for an extended period, the Eurozone’s GDP could see a cumulative drop of 1.2% by the end of 2026, according to Xtb.
Analysts note that Germany, which exports 10% of its goods to the US, and Ireland, with over 53.7% of its merchandise exports directed to the US, are among the most exposed economies.
Oxford Economics estimates that US tariffs of 30% on EU imports could reduce the Eurozone’s annual growth by up to 0.3 percentage points over the next two years, “bringing the economy to the brink of recession and causing growth to stagnate in the upcoming quarters.”
Despite this outlook, analysts do not plan to immediately alter their base forecast, believing that “the announcement could be more of a negotiating maneuver,” stated Ángel Talavera, Director of European Macroeconomics, in an analysis note.
“Nonetheless, the risk that tariffs could exceed the 10% assumed in our base forecast has significantly increased,” he emphasized.
The financial markets’ response also “suggests that investors see the potential for 30% tariffs on EU-exported goods primarily as a negotiation strategy by the Trump administration,” Xtb reports.
The brokerage further highlights that the EU is preparing for the possibility of implementing retaliatory measures, with Brussels readying retaliation on American products worth approximately 21 billion euros and preparing a second list valued at 72 billion euros.
A moderate retaliatory response “means that the impact of 30% tariffs would be disinflationary for Europe, especially if the euro appreciates against the dollar, as has consistently happened this year after previous escalations,” noted Talavera.
Thomas Hempell, Head of Macro and Market Analysis at Generali AM, also considers it likely that a last-minute provisional agreement will be reached to “mitigate the impact on markets,” despite the continued significant risk for emerging countries with a trade surplus.
The expectation is that the EU will reach an agreement to avoid severe consequences due to stagflation in the US. The most likely outcome, according to the analyst, is provisional agreements and another extension, with a moderate impact on the markets.
