Macroeconomic Impact of Tariffs on the US and the Euro Area: A Structured Modelling Approaches Review

Brian Fabo () and Juraj Falath ()
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Brian Fabo: National Bank of Slovakia
Juraj Falath: National Bank of Slovakia

No OP 3/2026, Working and Discussion Papers from Research Department, National Bank of Slovakia

Abstract: We examine how renewed United States (US) protectionism under the second Trump administration affects the euro area (EA) economy. Using evidence from structural and empirical studies, we synthesise the main transmission channels through which tariffs influence output and inflation. We show that tariffs operate simultaneously as supply and demand shocks, with the balance depending on trade structure, exchange-rate adjustments, and policy responses. A 10% US universal import tariff is estimated to lower euro area GDP by around 0.1–0.5% in the scenario without global retaliation to US actions. There is minimal inflationary impact on Europe across all types of models. The results suggest that euro area policymakers should treat such shocks primarily as external demand disturbances rather than inflationary threats.

JEL-codes: E52 F13 F41 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2026-07
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Persistent link: https://EconPapers.repec.org/RePEc:svk:wpaper:1143

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