Tariffs won’t cause a burst in producer prices in the Eurozone

Potential US tariffs would be disruptive for the eurozone economy as a whole, but we think their inflationary impact is likely to be contained. As US imports account for around 10% of total extra-EU imports, we estimate a 10% across-the-board tariff would only increase the producers prices index by 0.5%.

What you will learn:

• Our forecast for eurozone producer prices has been below consensus for two years. But now the post-energy crisis adjustment seems to be almost over. However, we don’t believe that prices will start to rise significantly just yet, despite some pressure in the second half of 2024.
• We argue that the recent rise in prices has been driven by supply-side factors, which are set to fade. What’s more, the weakness of the current economic conjuncture means that the supply shock won’t be enough to trigger a sustained rise in inflation.
• The impact on different sub-sectors will vary considerably, with large differences even within the same sectors, with raw materials being the most affected, while other manufactured products such as furniture and textiles will be among the least affected.

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