“The return of President Trump is likely to mean a significant rise in US import tariffs in 2025. China will bear the brunt, but Europe will also be hit, leading to a sharp slowdown later in the year • Tariffs threaten the nascent recoveries in domestic demand in the eurozone and China, while in the US, deregulation and tax cuts will help blunt the real income shock from tariff rises • Inflation in the US is expected to reaccelerate, but to fall below the 2% target in the eurozone • All of this is likely to drive a divergence in Fed & ECB policy, with slower and fewer Fed rate cuts, and the ECB deposit rate falling to 1%. This will push the euro to parity vs the dollar in the course of 2025. China is better prepared for Trump than it was in 2018, but growth is still expected to slow materially.”
Morten W. Langer
