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

Author

Listed:
  • Brian Fabo

    (National Bank of Slovakia)

  • Juraj Falath

    (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.

Suggested Citation

  • Brian Fabo & Juraj Falath, 2026. "Macroeconomic Impact of Tariffs on the US and the Euro Area: A Structured Modelling Approaches Review," Working and Discussion Papers OP 3/2026, Research Department, National Bank of Slovakia.
    • Handle: RePEc:svk:wpaper:1143
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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