Impact of Trade Tariffs on US and EU Economies

European Trade Commissioner Valdis Dombrovskis revealed on Friday that new projections indicate the United States' gross domestic product (GDP) could decrease by 0.8% to 1.4% by 2027, attributing this potential decline to the effects of trade tariffs. The European Union's GDP is also expected to see a reduction, albeit a smaller one, of 0.2%.

Potential Long-Term Effects

Should these trade measures become permanent or if the trade war intensifies, the EU forecasts more severe consequences: a 3.1% to 3.3% contraction in the US economy, a 0.5% to 0.6% drop in the Eurozone, and a 1.2% decrease in the global economy within three years. Additionally, global trade could decline by 7.7%.

Unaccounted Factors

Dombrovskis pointed out that the current models do not factor in the potential loss of investor and business confidence in the US, which could further exacerbate the situation. "Europe did not start this confrontation and Europe does not want this confrontation," he emphasized, highlighting the detrimental impact of tariffs on the transatlantic trading partnership, valued at €1.6 trillion in 2023.