A looming trade war sparked by Donald Trump could push the eurozone economy from “slow growth” to “full-blown recession”, according to Dutch investment bank ING. At the same time, they estimate that the recession may begin “even before Trump is sworn in on January 20.” While tariffs may not have a real impact on Europe until late 2025, they explain, “renewed uncertainty and fears of a trade war could push the eurozone economy into recession at the end of the year.” How European policy will respond to the new circumstances is hard to guess, but there is a consensus that the European Central Bank will be forced to do “hard work”, that it will lower key interest rates sooner than how much he planned to reduce the cost of borrowing.
ECB Vice President Luis de Guindos is the first member of the bank’s Governing Council to speak after Trump was declared the winner of the US presidential race.
He said it will take time to assess how Trump’s trade policies will affect the economy. But if the US president-elect implements the import tariffs he threatened during his campaign, Luis de Guindos is very confident that the global economy “will face potentially damaging shocks to growth and inflation.” Production would be weaker, price pressures stronger and established trade flows disrupted. Heated talks are expected to begin soon between EU officials and Trump’s transition team on how to avoid the tariffs. Incoming EU trade commissioner Maroš Šefčovich said he would offer “cooperation” to the winner of the election, but “in defense of our interests”.