* Analysts warn that the sweeping U.S. tariffs and potential EU retaliation could trigger trade flow disruptions, stifle growth prospects, and fuel inflation, further destabilizing the EU’s already fragile economy.
* The newly imposed U.S. tariffs, targeting around 70 percent, or 380 billion euros (416 billion U.S. dollars), of the EU’s exports to the United States, have sent shockwaves through European markets and industries.
* While eurozone inflation eased slightly to 2.2 percent in March from 2.3 percent in February, ECB policymakers caution that renewed trade tensions could cause a short-term spike in prices, especially if the EU retaliates with its own tariffs.
BRUSSELS, April 7 (Xinhua) — U.S. President Donald Trump placed the EU in the worst category of U.S. trade partners on Wednesday, imposing a 20 percent tariff on all imports from the bloc.
In response, European Commission President Ursula von der Leyen said on Sunday that the EU stands ready to defend its interests with “proportionate countermeasures” if necessary.
Analysts warn that the sweeping U.S. tariffs and potential EU retaliation could trigger trade flow disruptions, stifle growth prospects, and fuel inflation, further destabilizing the EU’s already fragile economy.
HEAVY BLOW
The newly imposed U.S. tariffs, targeting around 70 percent, or 380 billion euros (416 billion U.S. dollars), of the EU’s exports to the United States, have sent shockwaves through European markets and industries.
European stock markets tumbled on Thursday and Friday, with Germany’s benchmark DAX index plummeting nearly 5 percent on Friday and the FTSE 100 plunging 4.95 percent, its worst daily decline since March 2020.
Zarko Puhovski, a Croatian political analyst, told Xinhua that Trump’s policies have created significant uncertainty in the business world. “As far as I can judge, the EU will suffer the most, as it lacks both the unity and the political strength to stand against the United States.”
The new U.S. tariffs threaten to further strain Europe’s already fragile industrial sector. In January, seasonally adjusted industrial production in the EU rose by just 0.3 percent compared to December 2024, according to Eurostat, the statistical office of the EU.
“The European economy will be hit hard. Europe now faces the difficult challenge of finding new markets, a process that will be neither quick nor easy. We’re seeing rising prices and declining sales,” said Milen Keremedchiev, a Bulgarian economic expert.
Germany, the EU’s largest economy and a major exporter to the United States, is expected to bear the brunt of the tariffs. The German Economic Institute estimates the country could suffer losses of up to 200 billion euros (220 billion dollars) under the new tariffs.
Similarly, the Austrian Institute of Economic Research (WIFO) warned that the tariffs would stifle European exports, particularly in the automotive, machinery and metal sectors.
“The U.S. protectionist measures strike at the heart of Austria’s industrial base. In sectors like automotive and machinery, where export dependency is especially high, the new tariffs are causing substantial losses,” said WIFO economist Hendrik Mahlkow.
SLOWER GROWTH FORECASTS
The new U.S. tariffs could trigger a cycle of retaliation and a downward economic spiral for both the United States and the world as a whole, said Bernd Lange, chairman of the European Parliament’s international trade committee, while addressing the European Parliament in Strasbourg, France.
Amid rising concerns over a slowdown, analysts and financial institutions have revised down their growth projections for Europe. Goldman Sachs warned that the region could enter a “technical recession” in 2025, projecting minimal growth of below 0.2 percent in the rest of the year.
ING, a Dutch bank, lowered its eurozone GDP growth forecast to 0.6 percent for 2025 and 1.0 percent for 2026. “Consumption and investment are likely to remain subdued, keeping economic growth in the eurozone at a snail’s pace,” ING said.
The Czech finance ministry estimated that the tariffs would shave 0.6 to 0.7 percentage points off the country’s GDP growth this year. Its January forecast predicted 2.3 percent growth in 2025. Czech Finance Minister Zbynek Stanjura warned that consumers, both in the Czech Republic and the United States, would ultimately bear the brunt of the added costs.
In Austria, the real GDP is expected to decline by 0.23 percent in the short run and 0.33 percent in the medium and long run, with similar declines projected for the EU as a whole, according to WIFO.
While the immediate impact on Romania may appear limited, Alex Milcev, head of EY Romania’s tax and legal department, cautioned that indirect effects could be substantial. “Price increases and potential punitive measures from the U.S. could affect Romania’s economy, especially sectors closely linked to the American market,” he said.
MONETARY POLICY DILEMMA
As the economic fallout from the new U.S. tariffs ripples across Europe, attention is now turning to the European Central Bank (ECB), which faces a growing monetary policy dilemma: how to respond to rising inflationary pressure amid weakening economic growth.
Although inflation has been declining in recent years, the new tariffs have reignited concerns, fueling speculation whether the ECB would continue to consider interest rate cuts to shore up the economy or not.
Slovak Central Bank Governor Peter Kazimir warned that the 20 percent U.S. tariffs on all EU goods and services will have a dual negative effect, undermining economic growth while driving up prices.
“Tariffs impact prices first and foremost,” he said, adding that they also threaten labor market sentiment and overall growth momentum.
Ljubo Jurcic, a Croatian economist and former minister of economy, told Xinhua that the tariffs would slow down economic growth and increase inflation by 1-3 percent worldwide.
While eurozone inflation eased slightly to 2.2 percent in March from 2.3 percent in February, ECB policymakers caution that renewed trade tensions could cause a short-term spike in prices, especially if the EU retaliates with its own tariffs.
The minutes from the ECB’s March policy meeting, released on Thursday, revealed internal divisions over the timing of potential interest rate cuts.
While uncertainty around the inflation outlook remains high, growth concerns are likely to take precedence in the short term as Europe faces slower economic forecasts amid the new U.S. tariffs, said analysts. ■
