Euro Area Faces Potential 0.4% GDP Decline from US Tariffs
The Euro Area is preparing for potential higher tariffs as Donald Trump may return to office. The Institute of International Finance (IIF) estimates that US tariffs could lower Euro Area GDP by 0.4%. Many European nations are still recovering from the pandemic, and increased competition from China could exacerbate economic challenges.
Germany, France, and Italy are expected to be significantly impacted. Italian and German machinery and industrial goods exports may suffer greatly, while France's aerospace and luxury goods exports could decline by up to 4% during Trump's next term, according to the IIF.
A new tariff scenario chart from Bloomberg Economics indicates that Trump's statements often influence global currencies more quickly than the implementation of actual tariffs, which may take weeks or months to enact. Historical context shows discrepancies between Trump's threats and actual policy changes, as seen when he retracted a proposed tariff on Mexico after negotiations.
Monitoring will continue as policies evolve and the new administration outlines its plans.