How would the Eurozone economy fare under a 30% US tariff?

US President Donald Trump’s threat to impose 30% tariffs on imports from the EU from August 1 represents another escalation in the ongoing trade war between the two blocs. Using our Global Economic Model, we estimate that this could cut Eurozone GDP growth by up to 0.3ppts annually over the next two years.

What you will learn:

• We estimate the US tariffs of 30% on imports from the EU threatened by President Trump would push the Eurozone economy to the edge of recession, with growth stagnating over the coming quarters.
• The range of GDP outcomes is driven by different assumptions on key sectors like pharma and cars but is also strongly influenced by our view around how much tariffs will raise uncertainty and damage confidence – and by extension corporate investment.
• If implemented, we still expect the EU to respond with targeted measures of a much smaller scope and magnitude. The latest decision to delay its planned retaliatory measures until next month shows the EU still hopes to reach a deal before the August 1 deadline.