The EU economies most exposed to the 15% US levies on imports agreed at the weekend are those with an elevated trade surplus and/or significant trade with the US, including Germany and Ireland. The effects of the higher tariffs this year will also be felt indirectly through their effects on global value chains.
Among the EU’s four largest economies (Germany, France, Italy and Spain), Germany and Italy are the most vulnerable, each facing an estimated short-term output loss of 0.4pps from the trade levies this year (Figure 1). The higher tariffs may reduce Spain’s output by a moderate 0.3pps in the medium run. France is expected to experience a more-modest cumulative reduction in output of 0.2pps in the medium term.
Trade Tensions Adversely Affect Euro Area Growth
Trade tensions adversely affect euro area growth, which Scope Ratings estimates at just 1.2% in 2025, though Scope expects growth to improve to 1.5% by next year, lifted by fiscal stimulus in Germany and higher defence spending across the EU.
Figure 1. US tariff rises set back growth in the largest EU economies
Cumulative impact on real output (percentage-point change) assuming the 15% levy on EU exports
The preliminary agreement will likely contain many caveats and carve-outs, demonstrating limited enforceability, serving only to avert a worst-case escalation and acting as the starting point for further negotiations.
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See all EUR/USD forecastsDennis Shen is the Chair of the Macro Economic Council and Lead Global Economist of Scope Group. The rating agency’s Macroeconomic Council brings together the company’s credit opinions from multiple issuer classes: sovereign and public sector, financial institutions, corporates, structured finance and project finance. Arne Platteau, analyst in Credit Policy at Scope Ratings, contributed to this research.