Markets rallied on the announcement of President Trump’s 90-day pause in his administration’s new global trade tariffs—with notable exceptions:
- The moratorium was restricted to trade partners that haven’t retaliated.
- Reciprocal tariffs weren’t lifted but instead lowered to 10%, except for China, which is now subject to a 125% levy.
- The 25% global tariff on steel, aluminum and automobile imports remains in force.
As well as the actual impact of the tariff measures, business confidence has also taken a hit, with survey evidence already pointing to lower economic growth. Further tariff-related initiatives, such as the US inquiry into imports of pharmaceutical goods and semiconductors, will likely create more uncertainty and loss of confidence.
Tariffs Are Already Damaging Europe’s Growth
Instead of the previously announced 20% tariff, the European Union (EU) is now subject to a 10% universal tariff—still a higher effective tariff rate than prior to the April 2 US announcement. Meanwhile, the EU voted on April 9 to impose tariffs on €21 billion of US goods—countermeasures that have also been put on hold. Despite the tariff pauses, the danger for euro-area economies is far from over, and damage is already being done.
Based on our assessment, growth is set to fall, with risks skewed to the downside. Compared with a counterfactual scenario in which the new tariffs were never implemented, and with only marginal damage to confidence, the hit to growth will probably be substantial. In the Display below, we show our 2025 forecasts across different scenarios. The wide range of possible outcomes reflects the high level of tariff uncertainty.
