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Insights on the impact of the 2024 US election on Washington and the global landscape
The return of Donald Trump to the White House is projected to have significant economic repercussions on Europe, with potential trade disruptions and increased defense spending, according to Goldman Sachs.
The investment bank has revised its 2025 growth forecast for the Eurozone to 0.8% from the previous estimate of 1.1%. Similarly, the UK’s economic growth forecast has been adjusted to 1.4% from 1.6%. Projections for 2026 have also been slightly reduced.
Goldman Sachs’s forecast is based on the expectation of targeted tariffs, particularly on European auto exports, rather than the more severe blanket tariffs proposed by Trump. If the broader tariffs were to be implemented, the negative impact on growth would be even more significant.
While increased defense spending is anticipated, the overall effect on growth is expected to be minimal due to higher deficits leading to increased bond yields and heightened uncertainty surrounding trade policies.
Key points highlighted by Goldman Sachs include:
— Anticipated trade tensions and potential tariffs are likely to hinder economic growth in Europe.
— Renewed defense spending under President Trump’s administration may provide a limited boost to growth, but could be constrained by various factors.
— The overall impact on real GDP in the Euro area is estimated at 0.5%, with varying effects on individual countries.
— Growth forecasts have been adjusted downwards for the Euro area, the UK, and other European countries.
— The inflationary effects of Trump’s policy agenda in Europe are expected to be minimal.
— Lower policy rates across Europe are forecasted in response to Trump’s policies.
Europe’s focus on “strategic autonomy” in recent years may prove beneficial in navigating these economic challenges.