Study indicates Trump tariffs possibly to cost EU USD1.25 trillion
(MENAFN) A new study by the German Economic Institute (IW) warns that a potential trade war with the United States could cost the European Union as much as €1.1 trillion ($1.25 trillion) between 2025 and 2028, should Donald Trump implement his proposed tariffs.
Earlier this month, the Trump administration proposed a sweeping 20% tariff on all EU imports and a 25% duty on car imports, aiming to reduce what Washington describes as an unfair trade imbalance. The EU had planned to retaliate with its own 25% tariffs, but Trump delayed most of the measures for 90 days to allow time for negotiations.
If talks fail and the tariffs go into effect, the economic impact on the EU could range from €780 billion ($886.5 billion) to €1.1 trillion over four years, the IW study said. Germany, the bloc’s largest economy, could see its GDP shrink by 1.2% annually under the tariffs—and by up to 1.6% if retaliatory measures are introduced by other nations.
Germany’s economy, which has already struggled through back-to-back years of contraction, is forecast to grow by just 0.1% in 2025. The IW predicts a cumulative output loss of €180 billion ($205 billion) for the country by 2028, mainly due to falling exports and investment.
In 2024, the US was Germany’s top trading partner, with bilateral trade totaling €253 billion ($287.5 billion). Experts warn that a trade dispute could hit critical sectors like automotive and pharmaceuticals.
The 90-day tariff delay has done little to ease investor concerns, with the IW noting that ongoing uncertainty is disrupting global investment strategies.
European Commission President Ursula von der Leyen has proposed a “zero-for-zero” tariff deal to eliminate duties on industrial goods, but Trump rejected the offer. He instead demanded the EU commit to purchasing $350 billion worth of American energy to avoid the tariffs, criticizing the bloc’s trade practices and citing the US trade deficit as justification.
Although trade talks were held this week between Washington and Brussels, no significant progress was made, and US officials indicated that most tariffs would likely stay in place, according to Bloomberg.
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