Tariff effects are starting to show

The scale of the US tariffs announced on April 2 suggests the economic impact on the Eurozone will be swift. Indeed, a range of high-frequency alternative data plus more timely surveys are already indicating early signs of the reaction to the tariff hit.

Industrial production, hiring, and consumer spending seem to have slowed since April 2. So far, however, these indicators aren’t pointing to imminent recession, in line with our baseline.

Meanwhile, tariff news is affecting business and consumer confidence, though less than we feared. Our proprietary sentiment data, developed with Penta, show a modest souring in corporate sentiment. However, this points to cutbacks in business investment and hiring, as firms scale back expansion plans.

The tariffs announced by US President Donald Trump on April 2 were clear-cut, but they didn’t lessen trade policy uncertainty. US tariffs on the EU have been paused at 10% as negotiations continue, and retaliatory measures are yet to be announced. But the range of possible outcomes remains wide, and uncertainty will continue to weigh on growth and investment particularly.