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Tariffs

US Tariffs on EU Threaten Euro, European Equities, and ECB Policy

Strategic Insights

— 2 min read

The European Central Bank is left to ponder the potential consequences of US tariffs on the European Union, which could hit the euro, put equities under pressure, and deepen economic slowdowns, analysts said on Monday. US President Donald Trump's decision to impose a 30% tariff on EU goods starting next month has sent shockwaves through European markets, with the euro weakening from its best level since September 2021. The EU has vowed to retaliate and is expected to hit back with serious measures at the US if negotiations fail.

Key Takeaways:

  • The US tariffs on the EU could hit the euro, putting it at risk of a prolonged and deeper economic slowdown.
  • European equities may suffer due to the uncertainty and potential for a full-blown trade war.
  • The EU has vowed to retaliate, but its ability to do so may be limited due to its lower exposure to the US market.
  • The Netherlands was the largest importer of goods from the US in 2024, while Germany was the largest exporter of goods to the US in the same year.
  • The EU trade surplus with the US increased by 5.5% in 2024 compared to 2023.
  • Analysts at Barclays expect a 10% tariff rate to be the most likely final outcome, but risks are now skewed to something higher.
  • XTB analyst Kathleen Brooks said the EU is willing to retaliate in a measured way and is looking to reach a trade deal with India by year-end.
  • Berenberg analyst Salomon Fiedler expects the EU to hit back with serious measures at the US if negotiations fail, including a tail risk of a temporary spiral in which both sides escalate with higher and higher tariffs.
  • The UK could be a "clear winner" due to its trade deal with the US, Panmure Liberum analysts added.

Statistics:

  • The US tariffs on the EU could lead to a 0.3ppt increase in US consumer prices.
  • The EU exported EUR531.6 billion in goods to the US in 2024, while importing EUR333.4 billion.
  • The trade surplus with the US increased by 5.5% in 2024 compared to 2023.
  • The Netherlands imported EUR44.8 billion worth of goods from the US in 2024.
  • Germany exported EUR207.1 billion worth of goods to the US in 2024.

Sources:

  • Alliance News, "US tariffs on the EU threaten to hit the euro, put continental equities under pressure"
  • Bloomberg, "Barclays analysts comment on US tariffs on EU"
  • Reuters, "EU vows to retaliate if US imposes 30% tariffs"
  • Eurostat, "Trade in goods with the US, 2024"
  • XTB, "EU to retaliate against US tariffs"
  • Berenberg, "EU to hit back with serious measures at the US if negotiations fail"

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