The recent announcement of tariffs on imports from the Eurozone by the United States has raised concerns about its potential impact on economic growth in the region.
UBS economists have analyzed the situation and found that the repercussions could be substantial, depending on how Europe responds. The decline in the Eurozone's GDP from the proposed tariffs is estimated to range from 0.28 to 0.43 percentage points, primarily due to a decrease in exports. The nominal value of the tariff is projected to be around EUR30 billion, representing about 0.2% of the Eurozone's GDP.
The inflationary effects of the tariffs depend on Europe's response, with potential increases in consumer prices and the GDP deflator. Currency depreciation also plays a role in this scenario.
The broader context of US tariff escalations, particularly with China, could have implications for Europe. The impact on domestic demand is expected to be relatively modest, but the potential decline in exports could have longer-term implications for economic growth in the Eurozone.
Overall, the situation requires careful monitoring and strategic responses from European policymakers.