The potential re-imposition of tariffs by the Trump administration poses a risk to Europe’s economic outlook.
According to analysts at Capital Economics, these tariffs could cause significant damage to the European economy, especially by affecting key industries such as car and machinery manufacturing, which rely heavily on exports to the United States.
The report indicated that customs duties could lead to higher costs for European exporters, making them less competitive globally.
This in turn would reduce demand for European products in the US market, leading to lower production and potentially significant job losses in affected industries.
Moreover, broader economic consequences could include slower GDP growth and weaker investor confidence across the region. Uncertainty surrounding trade policies could delay or reduce investment in European industries, which would hamper economic recovery.
Moreover, the ECB may face challenges in managing inflationary pressures that may arise from higher import costs.