abrdn: Impact Trump tariffs felt most strongly in EU's most troubled economies

abrdn: Impact Trump tariffs felt most strongly in EU's most troubled economies

27 februari 2025

Europa Verenigde Staten Handelsconflict
Trump (Photo credits TheDigitalArtist)

Felix Feather, Economist at abrdn, comments on Trump's trade tariffs on Europe.

'If 25% tariffs are imposed on some or all EU exports, the macroeconomic impact on the EU would be significant and uneven.

Our previous analysis suggested that a blanket 10% tariff would take 0.3-0.9% off the Eurozone’s GDP versus a counterfactual where no trade uncertainty arose. The impact of a 25% blanket tariff would of course be larger than this.

In our base case, the US will principally be looking to target goods for which it has a large trade deficit with the EU, but that is not reliant on the EU for supply.

Machinery and transport equipment fit this bill best, which would align with Trump’s long-standing criticism of the EU auto industry.

The US’ trade deficit with the EU in chemicals is of similar magnitude. However, the US might not choose to target this area given the importance of EU suppliers to the US market for pharmaceuticals and the political salience of drug prices.

If a final package of tariffs does include chemicals, the hit to the Eurozone could be very large indeed, approximating the effect of a blanket tariff.

Concerningly, the impact of tariffs would be most keenly felt in the Eurozone’s most beleaguered economies. Notably, Germany is very exposed to tariffs in autos and machinery.

By comparison, services-intensive southern European economies are far better insulated.

The macroeconomic implications of a 25% US tariff on the EU would be significant for the latter, especially if it covers a broad range of goods. Manufacturing intensive northern and central European member states would bear the brunt of the shock. However, broad tariffs might still be avoided if the US wins concessions from the EU in other areas.'

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