Economists at Goldman Sachs estimate that the tariffs proposed by Donald Trump on several European countries could reduce real GDP by 0.1% to 0.2% in the affected economies. However, they caution that there is still significant uncertainty over whether the measures will ultimately be enforced.
Trump recently announced plans for the United States to introduce a 10% import tariff starting February 1 on goods from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland. He also said the tariff would rise to 25% on June 1 and remain in place until the U.S. reaches an agreement to purchase Greenland.
Goldman economists stressed that it remains unclear whether the tariffs will be implemented at all. Their analysis assumes the new levies would apply on top of existing tariffs, rather than replacing them.
The proposed measures would affect EU member states exporting roughly €270 billion worth of goods to the U.S. each year, representing about half of total EU exports to the American market.
For Germany, the Netherlands, and Finland, the impacted exports would equal 3% to 3.5% of GDP if the tariff were applied broadly to all goods shipped to the U.S. If limited only to goods already subject to U.S. reciprocal tariffs, the exposure would be lower, at 1.5% to 2% of GDP.
Across the euro zone, total exposure is estimated at 1% to 1.5% of GDP, while the UK’s affected exports would amount to roughly 1% to 2% of GDP.
According to Goldman’s analysis, Germany would face the largest economic impact, with a GDP drag of around 0.2% if the tariff is introduced as a 10% incremental reciprocal levy, which the bank considers the most likely scenario. The impact could rise to 0.3% if the tariff were applied as a blanket measure.
If tariffs were raised to 25%, the GDP hit across affected countries could increase to 0.25% to 0.5%. These effects would come on top of the 0.4% GDP drag Goldman previously estimated from last year’s tariff increases.
The report also warns that the economic impact could be larger if confidence deteriorates or financial markets react negatively. On the other hand, the damage could be partially offset if European exporters reroute trade through EU countries not subject to the new tariffs.
Goldman expects minimal inflationary effects, assuming no retaliation, as weaker demand would likely offset higher import costs. Using a simple Taylor-rule framework, the bank said the outlook would point to slightly lower policy rates, all else being equal.
Possible EU Retaliation Scenarios
Goldman outlined three potential levels of retaliation by the European Union.
First, the EU could delay ratification of last year’s EU–U.S. trade agreement, which includes planned tariff reductions that require approval by the European Parliament. Goldman sees this as the lowest hurdle response.
Second, the EU could reintroduce counter-tariffs on U.S. goods using pre-approved lists from last year. These include a €25 billion package mirroring U.S. steel and aluminum tariffs, covering products such as soybeans, copper, iron, motorcycles, and orange juice. Earlier EU plans targeted up to €93 billion of U.S. imports, including aircraft, cars, and agricultural goods. Such countermeasures would place modest upward pressure on European inflation, the report said.
Third, the EU could activate its Anti-Coercion Instrument (ACI). While activation does not immediately trigger action, it signals a readiness to escalate and allows time for negotiations. The ACI could involve measures beyond tariffs, including restrictions on U.S. investments and taxes on services such as digital platforms.
Goldman believes the threshold for retaliation by the United Kingdom is higher, consistent with its approach during last year’s trade talks. Instead, the bank expects the UK to prioritize diplomatic engagement with Washington, a stance echoed recently by Culture Secretary Lisa Nandy.
