{"id":9265,"date":"2025-07-20T00:20:15","date_gmt":"2025-07-20T00:20:15","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/9265\/"},"modified":"2025-07-20T00:20:15","modified_gmt":"2025-07-20T00:20:15","slug":"trumps-tariffs-are-tipping-europe-toward-recession","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/9265\/","title":{"rendered":"Trump\u2019s tariffs are tipping Europe toward recession"},"content":{"rendered":"

U.S. Federal Reserve Governor Christopher Waller said yesterday that he thinks the Fed should cut interest rates at the end of July because he thinks the U.S. economy\u2019s \u201cmomentum has slowed significantly<\/a>,\u201d and he\u2019s worried about unemployment rising.<\/p>\n

He\u2019s not alone. Oxford Economics\u2019 Ryan Sweet told clients this week that President Trump\u2019s tariffs will shave growth off the U.S. economy. \u201cThe hit to US GDP growth is 0.1ppt this year and 0.3ppts next year,\u201d he wrote in a note seen by Fortune.<\/p>\n

While the tariffs\u2019 effects on the Fed rate and the U.S. economy have generated most of the headlines recently, they are having a serious negative effect on the European economy too.\u00a0<\/p>\n

Trump has threatened to impose a 30% tariff on that trade if the parties don\u2019t strike a better deal. Analysts are saying that if no deal is reached, the tariff barrier could push Europe into a recession.<\/p>\n

\u201cA 30% US tariff on EU exports would send the EZ economy into recession in the second half of 2025,\u201d Pantheon Macroeconomics\u2019 Claus Vistesen said in a recent research note. \u201cMarkets don\u2019t believe Mr. Trump\u2019s tariff threats, but a US-EU escalation cycle is still a big near-term risk. The ECB will hold fire [on retaliating] in July unless it is absolutely certain a 30% tariff is coming over the summer.\u201d<\/p>\n

\u201cA sustained 30% US tariff \u2026 would pull down our 2025 and 2026 growth forecasts by 0.3pp and 0.5pp, respectively, to 0.7% and 0.8%,\u201d he said.<\/p>\n

At Oxford Economics, Angel Talavera agrees: \u201cWe estimate the US tariffs of 30% on imports from the EU threatened by President Trump could shave up to 0.3ppts off annual Eurozone growth over the next two years. This would push the Eurozone economy to the edge of recession, with growth stagnating over the coming quarters,\u201d he wrote in a recent note.<\/p>\n

Unemployment in the U.K. is already on the rise\u2014it ticked up to 4.7%<\/a> over the last three months, the highest in four years.<\/p>\n

The problem is that the U.S. is Europe and Britain\u2019s largest export market. About 20% of EU exports go to the U.S.<\/a> at a value of around \u20ac500 billion ($581 billion). Europe\u2019s trade doesn\u2019t immediately have anywhere else to go\u2014at least not at that scale.<\/p>\n

\u201cThe sheer size of the US economy means that it takes a large share of Europe\u2019s exports, particularly pharmaceuticals and autos. This will make it difficult for Europe to switch to other markets,\u201d Oxford Economics\u2019 Matt Swannell said in a note this week.<\/p>\n

It\u2019s not just the size of Trump\u2019s tariff demand, it\u2019s the complexity. \u201cOn top, there are sectoral tariffs of 25% on cars\/parts, as well as 50% on aluminum and steel (up from 25% since June 4). Effective tariffs rates could remain at 12-17% (assuming a 10-20% universal tariff), which is significantly higher than the around 1% at the start of the year with automotives, steel and potentially pharma hit by sectoral tariffs,\u201d Deutsche Bank\u2019s Marion Muehlberger and Ursula Walther told clients this week. Pharmaceuticals are one of the biggest export markets for Europe, and Trump has threatened to tax them at a rate of 200% on entry to the U.S.<\/p>\n

Finally, there\u2019s the ever-changing nature of Trump\u2019s demands. Until a few weeks ago, a 30% tariff wasn\u2019t even on the radar.<\/p>\n

\u201cIn June, the ECB\u2019s baseline scenario assumed just a 10% tariff, and even the downside scenario only went up to 20%. A 30% tariff would be more damaging to the eurozone economy, even if European retaliation eventually pushed inflation higher,\u201d ING\u2019s Carsten Brzeski said in a research note this week.<\/p>\n

European stock markets are whistling past this graveyard at the moment. The Stoxx Europe 600 and the UK\u2019s FTSE 100 are both at or near all-time highs. France\u2019s CAC 40 is up 6% YTD and Germany\u2019s DAX blue chip index is up a staggering 21.69% YTD, based largely on Germany\u2019s big fiscal military spending plan.<\/p>\n

Here\u2019s a snapshot of the action prior to the opening bell in New York:<\/p>\n

S&P 500 futures were flat this morning, premarket. The index closed up 0.54% yesterday.\u00a0<\/p>\n

STOXX Europe 600 was up 0.4% in early trading.\u00a0<\/p>\n

The UK\u2019s FTSE 100 was up 0.32% this morning, placing it above 9,000, which would be an all-time high if it holds.\u00a0<\/p>\n

China\u2019s CSI 300 was up 0.6%.\u00a0<\/p>\n

Japan\u2019s Nikkei 225 was down 0.21%.\u00a0<\/p>\n

Bitcoin is still above $118K.<\/p>\n","protected":false},"excerpt":{"rendered":"U.S. Federal Reserve Governor Christopher Waller said yesterday that he thinks the Fed should cut interest rates at…\n","protected":false},"author":2,"featured_media":9266,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,1294,591,4168,467,4762,156,56,54,55],"class_list":{"0":"post-9265","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-europe","11":"tag-federal-reserve","12":"tag-markets","13":"tag-stock","14":"tag-tariffs","15":"tag-uk","16":"tag-united-kingdom","17":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/9265","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=9265"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/9265\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/9266"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=9265"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=9265"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=9265"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}