Eurozone's economic forecasts slashed following Trump victory

The eurozone can expect a 0.5% hit to real GDP due to Trump's victory in the US presidential election, predicted economists at Goldman Sachs.

In a report published in the wake of the results, experts at the investment bank said that the outcome will hurt some nations more than others.

Germany could expect a 0.6% hit to real GDP, while Italy and the UK could see negative effects of 0.3% and 0.4% respectively.

Economists predict the hit will materialise between the first and fourth quarter of 2025.

They now estimate eurozone growth at 0.8% in 2025, down from a previous forecast of 1.1%. In 2026, growth is predicted at 1%, down from 1.1%.

One cause for concern is Trump's suggested tariffs on European imports.

"While the proposed 10% across-the-board tariff is a clear risk, our baseline expectation is that Trump imposes a more limited set of tariffs on European economies, targeting primarily auto exports," said GS researchers.

According to the ACEA, the US is the second largest market for EU vehicle exports - after the UK (counting in units).

In 2023, 16.9% of new car exports from the EU went to the US.

GS economists nonetheless added that despite the risk of import duties, "the actual magnitude of tariff increases might matter less for growth than the trade policy uncertainty created".

The report also explored the potential inflationary effects of tariffs in the eurozone, estimating a six-basis-point lift.

Tariffs could increase inflation as imported goods will be more expensive, although economists suggested that increased import costs will be balanced out by reduced demand for these goods in the eurozone.

On the subject of borrowing costs, the report said that Trump’s policy agenda should reinforce the case for lower interest rates