The potential reintroduction of tariffs by a Trump administration represents a risk to Europe’s economic outlook.

As per analysts at Capital Economics, these tariffs could significantly harm Europe’s economy, particularly by impacting key industries such as automotive manufacturing and machinery, which are heavily reliant on exports to the United States.

The report flags that the tariffs could lead to higher costs for European exporters, making them less competitive globally.

This, in turn, could reduce demand for European products in the U.S. market, leading to lower output and potentially substantial job losses in the affected industries.

Moreover, the broader economic consequences could include a slowdown in GDP growth and weakened investor confidence across the region. The uncertainty surrounding trade policies could result in delayed or reduced investment in European industries, further hampering economic recovery.

Additionally, the European Central Bank may face challenges in managing inflationary pressures that could arise from higher import costs.