Research Briefing
27 May 2025
New US tariffs would push Eurozone’s economy to the brink of recession
The economic costs of the 50% tariffs to the Eurozone could amount to 0.3%–1.0% of the Eurozone’s GDP by the end of next year.
Trump’s quick retreat after a call with EU Commission President von der Leyen suggests that the 50% tariff threat was a negotiation ploy, so we won’t alter our baseline. But Trump’s long-standing grievances with the EU, and the fundamental differences between the two sides in ongoing talks, mean that further escalation remains a risk.
What you will learn:
- US president Trump’s threat to impose 50% tariffs on EU exports marks a major escalation of the trade war. Two simulations using the Oxford Economics Global Economic Model show that the drag on GDP could build to between 0.3% to 1.0% by Q4 2026, depending on the scale of the corporate confidence and uncertainty shock. Business investment would suffer most, and more than exports, plunging up to 6% below our baseline.
- Although recession is narrowly avoided in these scenarios, it would remain a constant threat given the prolonged stagnation phase.
- Even assuming that Trump’s won’t follow through with his threat later, there could be an adverse economic impact on our baseline. EU corporates are likely to tread even more carefully now, when considering investment decisions, as they face high and rolling uncertainty.
Download our report to learn more.
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