An attendee wearing a ‘Make America Great Again’ cap poses inside Capital One arena ahead of an indoor rally on the day of the presidential inauguration of Donald Trump, in Washington, on January 20, 2025. [Amanda Perobelli/Reuters]
It is too soon to talk about the exact impact on Greece of the new United States government’s policies, because all we know so far is what was announced before Donald Trump took office. That said, if these announcements are actually implemented, and particularly the matter of imposing tariffs, either horizontally or on a case-by-case basis, this will certainly have negative consequences for the European Union’s economy, and especially for its already sluggish growth.
Our outlook for economic growth in the eurozone in 2025 is 1.1%. Imposing tariffs in the order of 10% would, according to estimates, whittle this by 0.5% in two years. This is a preliminary rough estimate that provides a sense of scale and leaves little doubt that the impact on the EU economy will be quite significant. Naturally, the effects will be more pronounced in countries with substantial exports to the US, particularly industrial goods, and less so in countries, like Greece, which are focused on the production of services.
Overall, I believe that if the campaign promises are carried through, and particularly the increase in tariffs, this will, after an initial period of market euphoria, lead to higher inflation in the US. This, in turn, will likely put the new administration at loggerheads with the Federal Reserve, which will no longer be able to continue lowering interest rates. The dollar could weaken if US Treasury bonds and bills, issued by an already heavily indebted government, lose value. Moreover, the imposition of a 60% tariff on China would likely trigger a depreciation of the Chinese yuan as a countermeasure to offset the impact, fostering a global climate of uncertainty. This would adversely affect both consumers and businesses across the West. In such a scenario, it would be prudent for the EU to adopt a unified policy and appoint a single representative to negotiate on its behalf. It would be a mistake for the EU to become divided on this issue.
In my personal view – and based on two centuries of global trade experience and economic theory – tariffs are never an effective policy tool. It has been demonstrated that a country’s objectives are achieved far more efficiently through domestic policy measures. Therefore, I want to believe that a more rational approach will ultimately prevail and that the US will continue to uphold its liberal open-trade policies.
Yannis Stournaras is the governor of the Bank of Greece.