The U.S. may wield the "tariff big stick," Goldman Sachs lowers eurozone economic growth forecast for next year
Goldman Sachs has lowered its GDP growth forecast for the Eurozone in 2025 to 0.8%, citing that Trump's return to the White House may exacerbate trade tensions, increase pressure on defense spending, and heighten geopolitical risks. The German economy is expected to grow by 0.5%, while the UK economy's growth forecast is 1.4%. Berenberg expects the Eurozone's economic growth to be revised down to 1%
According to the Zhitong Finance APP, Goldman Sachs economists have lowered their GDP growth forecast for the Eurozone in 2025 from the previous 1.1% to 0.8%. Goldman Sachs economists believe that the European economy will be affected by Donald Trump's return to the White House, as trade tensions between the region and the United States will intensify, Europe will face pressure to increase defense spending, and rising geopolitical risks will undermine business confidence.
The open economy of Europe is considered particularly vulnerable to Trump's protectionist agenda, as the Republican has promised to impose high tariffs on all imported goods during his campaign.
Goldman's core expectation is "to impose more limited tariffs on European economies," mainly targeting automobile exports. This means that Germany's weak economy and its largest manufacturer, Volkswagen, will suffer more, while Volkswagen itself is also in trouble.
Automobiles are Germany's largest single export product, and the United States is Germany's largest export market. Although the U.S. market accounts for less than 10% of Volkswagen's total sales, Volkswagen believes that the U.S. market has significant growth potential, especially in the electric vehicle sector.
Goldman now predicts that the UK economy will grow by 1.4% next year, down from a previous forecast of 1.6%; it predicts that the German economy will grow by only 0.5% in 2025, down from a previous forecast of 0.9%.
In contrast, Berenberg expects the Eurozone GDP to be less impacted. The private bank has lowered its forecast for Eurozone economic growth next year by 0.1 percentage points to 1%. Increased domestic demand in the U.S. and a stronger dollar (which makes European export products relatively cheaper) partially offset the impact of tariffs and trade tensions.
Berenberg's chief economist, Holger Schmieding, stated, "For European businesses, Trump's return to the White House means considerable trade policy risks and geopolitical uncertainty."
In September of this year, the OECD released its interim economic outlook report, predicting that global economic growth will stabilize at 3.2% in both 2024 and 2025. The OECD expects the Eurozone economy to grow by 0.7% this year and by 1.3% in 2025