President Trump’s clear victory poses significant downside risks to the euro zone’s growth prospects, and especially those of Germany and the Netherlandsoriented to export, point out the economists of ABN AMRO.
Downside risks to euro zone growth and inflation rise
“Trump’s signature policy is a universal tariff on all US imports, with a rate that (depending on the speech heard) has ranged between 10-20%. We estimate that a 10% universal tariff would lead to to a sharp drop in eurozone exports, and would affect eurozone growth by 1.5 pp in the coming years, meaning the economy would likely see further stagnation rather than continuing on its recovery path. “
“While it remains highly uncertain to what extent Trump will pursue his tariff plans, the high probability that his Republican Party will gain a majority in the House to go along with his new majority in the Senate significantly increases the risk that he will move forward with the entire tariff agenda. “We are currently reviewing our base case for the US and Eurozone economies and will have much more to say on this in the coming weeks.”
“For now, we judge that the downside risks to euro zone growth and inflation have increased significantly, which would mean that the ECB would cut rates at a potentially faster pace and/or that rates would fall further than our current expectation of a 1.5% terminal rate. We will provide further updates in due course, see our previous article here on what Trump would mean for Europe.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
