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What impact will new US tariffs have on the wallets of people in Europe?

Passers-by in the main shopping street 'Zeil' in the centre of Frankfurt, Germany, on Saturday 5 August 2023.
Passers-by in the main shopping street 'Zeil' in the centre of Frankfurt, Germany, on Saturday 5 August 2023. Copyright  Michael Probst/Copyright 2023 The AP. All rights reserved
Copyright Michael Probst/Copyright 2023 The AP. All rights reserved
By Amandine Hess
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The 20% tariffs imposed by the Trump administration on European products could drive down prices on the continent.

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The introduction of 20% customs duties on European products could lead to deflation, or lower prices, in Europe.

That would be caused by an increase in supply from China but also within the European Union.

"One of the factors that will lead to lower prices in the EU will of course be exports from countries like China, which are now being redirected towards Europe," Niclas Poitiers, a researcher at the Bruegel think tank, told Euronews.

"The second factor that explains why Europe could potentially see a drop in prices is that some exports destined for the United States are now remaining on the market," he added.

"For example, if you now have high customs duties on Italian wine, more of this wine will end up in the single market, and so the prices of these products will fall."

Lower prices would seem to be good for stimulating the purchasing power and consumption of Europeans and therefore for growth.

But on the other hand, deflation has harmful effects on the economy, as it encourages households to postpone their purchases in the expectation of a further fall in prices.

This creates a vicious circle of falling wages and rising unemployment. So we'll be buying cheaper, but at what price?

Spirits with and without the star mark making it easier for customers to buy European goods in Denmark, 17 March, 2025
Spirits with and without the star mark making it easier for customers to buy European goods in Denmark, 17 March, 2025 AP Photo

Uncertainty ahead

For Tobias Gehrke, a researcher at the European Council on Foreign Relations (ECFR), uncertainty poses the greatest risk to the economy.

"These customs duties are generalised. All products, all exports from Europe to America will be affected. Think of machinery, chemicals and cars. These companies may now face a burden", he told Euronews.

"I think that's the biggest risk. The uncertainty that will set in means that companies may not invest in Europe. This could have a very negative effect in a few months or a few years on employment and growth."

However, economists don't have a crystal ball, and there are many unknown factors that make predictions difficult.

In particular, China's reaction and the EU's response will weigh heavily in the balance, while US President Donald Trump could also use tariffs as leverage in other negotiations.

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