No signs of tariff-induced supply stress – yet

Our proprietary Eurozone Supply Stress Indicator shows that supply stress is still low, even after the US tariff announcement on April 2. Although the impact of tariffs will take time to feed through supply chains, this is a good starting position for the Eurozone economy and ECB to navigate through the trade turmoil.

What you will learn:

• The ESSI reading and other timely data support our view that the negative demand shock from US tariffs will outweigh supply pressure. Coupled with a stronger euro and weaker commodity prices, we expect this to result in headline inflation of below 2% in 2025-26.
• But there are still supply risks. Most notably, the tariff status quo is enough to sever and reshape global supply chains – any escalation, including EU retaliation, would only create more pressure on supply. Tariffs also diminish returns to scale for exporters, and uncertainty might lead to global repricing or ‘uncertainty premia’.
• Conversely, US tariffs could indirectly lead to lower supply pressure. The re-routing of Chinese exports from the US to the EU could lower core goods’ prices. The same applies to EU products originally destined for the US, though these might still supplant Chinese exports in the US.