Yen Extends Gains as BOJ Rate Hike Bets Rise 
Global Markets Brace for Fed Rate Hike as Oil Tops $91 
Dollar Hits Two-Week High as Iran Conflict Lifts Oil and Bond Yields 
Asian Currencies Rise as Yen Surges on BOJ Rate Hike Bets 
South Korea Unveils Record $597 Billion 2027 Budget to Boost AI and Chips 
Gold Prices Slide as Iran Conflict Fuels Fed Rate Hike Bets 
Australia Current Account Deficit Widens to A$27.2 Billion 
RBNZ Raises Interest Rate to 2.75%, Kiwi Dollar Slides 
South Korea Inflation Rises to 3.1% in August 
Oil Prices Rise as U.S.-Iran Fighting Fuels Supply Fears 
Australia Trade Surplus Beats Forecasts in July as Exports Fall 
European Stocks Edge Higher as Bond Yields Ease 
Bessent Urges Japan on Fiscal Discipline, BOJ Rate Hikes 
China Services PMI Beats Forecasts as Domestic Demand Improves 
Bank of England Sees Surge in Higher-Risk Collateral 
Gold Prices Hold Near $4,400 as Fed Rate Hike Bets Ease 
Add as a preferred source on Google
As Donald Trump hints at renewed US tariffs, Citi economists suggest potential disinflationary impacts on the Eurozone. With limited pass-through from import prices and weakened growth forecasts, the already-fragile European economy faces further challenges in its recovery journey.
Tariffs Could Reverse Economic Momentum in the Eurozone
While President-elect Trump has hinted that trade tariffs will be on his political agenda, Citi argues that they could have the opposite effect in the Eurozone, where inflation is already at a low point, and that a tit-for-tat U.S.-EU trade spat could spell fresh inflationary pressures, Investing.com shares.
"Even if the EU retaliates like-for-like with reciprocal tariffs, the HICP impact is likely negligible," observed economists from Citi in a recent note.
U.S. imports account for little over 10% of all commodities imported into the Euro Area. Of this, 25% are energy imports, however experts predict that this sector will remain tax-free. A mere 6% of U.S. imports to the Eurozone are for consumption products, therefore the import price-to-HICP passthrough is "usually low," they emphasized.
Eurozone Growth Downgrade Highlights Economic Risks
After downgrading Eurozone GDP growth by 0.3%, economists warned that the prospect of a 10% blanket US tariff on EU goods and additional measures against China, the EU's largest import market, will further burden economic growth in the single currency.
"This shock to the already-struggling European manufacturing sector could weigh on employment and wages in the tradeable sector and beyond," according to the researchers.
While the United States and China have profited from trade diversion in the past due to the collapse of US dependency on China, Citi predicts that tariffs will decrease demand for products from the Eurozone.
Lessons From Trump's Past Tariffs on Europe
To get a sense of what lies ahead for the Eurozone, it's helpful to examine the effects of tariffs imposed by the previous Trump administration. Economists have found that the increase in Chinese import penetration has had "likely sizable disinflationary implications," making it the most consequential outcome of Trump's past trade fights for Europe.
