Latest news with #Stehn
Euronews
16-07-2025
- Business
- Euronews
Trump's 30% tariffs threaten to burst Europe's bullish trade
Europe's economic optimism is facing a critical test as former US President Donald Trump's unexpected threat to impose a 30% blanket tariff on EU exports from 1 August reignites fears of a transatlantic trade war. With markets heavily positioned for a European growth renaissance fuelled by fiscal expansion, any escalation could reverse months of investor confidence and spark sharp corrections in European assets. While European officials hope to de-escalate tensions before the deadline, the threat has already introduced significant policy uncertainty at a time when sentiment on European equities and the euro is riding high. Goldman Sachs: Tariffs could hit Eurozone GDP by 1.2% According to Goldman Sachs, if the full 30% tariff package is implemented and sustained, it would raise the US effective tariff rate on EU goods to 26 percentage points, up from the current 8.5. The investment bank warns that this could result in a cumulative 1.2% decline in eurozone GDP by end-2026, with the most acute impact likely to materialise in the next few quarters. Even under Goldman's baseline scenario, which assumes a negotiated outcome retaining sector-specific tariffs and adding new levies on critical goods like pharmaceuticals and aviation components, the eurozone would still face a 0.6% GDP hit. 'Much of the current strength in manufacturing reflects front-loading ahead of tariffs,' said Sven Jari Stehn, chief European economist at Goldman Sachs. "Combined with the ongoing appreciation of the Euro, we see little growth in the second half," Stehn added. Stehn expects the EU to respond gradually to a 30% across-the-board tariff, likely beginning on the day the new US duties take effect — potentially increasing the risk of further trade escalation. EU holds fire, for now, but prepares countermeasures Despite the economic risks, Brussels is opting for restraint. An EU spokesperson confirmed on Tuesday that the bloc has no intention to implement countermeasures before 1 August. Nonetheless, preparations for retaliation are under way. The EU's trade representative Maroš Šefčovič warned that 30% tariffs would make transatlantic sales "almost impossible", and confirmed that Brussels has drafted a new package of rebalancing measures worth €72 billion in imports from the US, complementing the existing rebalancing measures for steel and aluminium. German Chancellor Friedrich Merz struck a cautious tone, saying: 'The EU is refraining from countermeasures for now, but the US should not underestimate our willingness to respond.' 'The goal is a quick solution,' Merz added. A bullish Europe trade under threat The latest Trump's tariff threat lands at a pivotal moment for market sentiment. Since the start of the year, the euro has surged over 11% against the US dollar, marking its strongest first-half performance since the currency's inception. European equities, measured by the EURO STOXX 600, have gained 10%, outperforming the S&P 500 by 4 percentage points. Bank of America's July European Fund Manager Survey showed investors overwhelmingly bullish on Europe. A net 44% expect stronger eurozone growth in the coming 12 months, up from 29% in June, driven largely by Germany's landmark €500bn infrastructure programme and broader fiscal easing. Investor exposure to eurozone equities is at a four-year high, with a net 41% of fund managers overweight, up from just 1% in January. The euro itself has become heavily overbought, with a net 20% overweight — the highest since January 2005 — after the fastest six-month positioning reversal on record. Sector preferences in the Bank of America's survey showed a strong tilt towards cyclicals, banks, and German equities, with autos and basic resources among the most underweighted. The sharp positioning shift reflects a belief that European macro fundamentals can decouple from US policy headwinds, with 63% of respondents viewing fiscal expansion as powerful enough to shield the bloc from Trump-induced turbulence. But the risk now is that these bullish expectations could unravel swiftly if the tariffs are implemented, triggering a sharp deterioration in sentiment, earnings outlooks, and growth momentum across the eurozone.
Yahoo
20-06-2025
- Business
- Yahoo
Goldman's Stehn on Norges Bank's Rate Decision
Goldman Sachs Chief European Economist Jari Stehn discusses the unexpected decision by Norway's central bank to cut its key deposit rate by a quarter point to 4.25%. "We hadn't expected that," Stehn tells Bloomberg's Francine Lacqua. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Euronews
01-04-2025
- Business
- Euronews
How could the European Central Bank react to Trump's trade tariffs?
ADVERTISEMENT The European Central Bank (ECB) is bracing for renewed economic uncertainty as US President Donald Trump prepares to impose wide-ranging tariffs. On 2 April, the United States is expected to unveil a new round of 'reciprocal tariffs,' a key plank in President Donald Trump's renewed push to narrow America's trade deficit. While the exact scope and scale remain uncertain, speculation has intensified that the White House could impose tariffs of up to 25% on European goods. These duties would build on existing levies already applied to autos and parts, which have increased the cost of vehicle-related exports by as much as 50%. The potential impact is significant. In 2024, the European Union exported €382 billion worth of goods to the US, according to the International Trade Centre. Of this, €46.3 billion came from vehicles, including cars, motorbikes and parts. With the US accounting for roughly 10% of total EU exports, the bloc is especially exposed to transatlantic trade friction. According to estimates cited by ECB President Christine Lagarde, a 25% tariff imposed by the US could lower euro area GDP by 0.5 percentage points and push inflation higher by a similar margin in the first year—assuming the EU retaliates in kind. This presents a textbook case of a policy conflict: tariffs act as both a supply shock, by making imports more expensive, and a demand shock, by undermining confidence and disposable income. Policymakers in Frankfurt find themselves grappling with an uncomfortable paradox: should they support growth by easing monetary policy, or lean against the inflationary shock that such duties might unleash? Related Trade tariffs could push up eurozone inflation by 0.5%, ECB's Lagarde warns 'Look through' the inflation hump? To economists like Sven Jari Stehn at Goldman Sachs, the answer hinges on the behaviour of inflation expectations. 'Our estimates suggest that US tariffs would have materially negative effects on growth with modest (and temporary) effects on inflation,' he said in a recent note. The standard policy playbook, Stehn noted, would argue in favour of rate cuts, as long as longer-term inflation expectations remain anchored. Goldman's models show that under such assumptions, the ECB's optimal strategy would be to 'look through' the inflation spike and thus lower interest rates. Goldman Sachs continues to expect the ECB to cut interest rates in April, followed by another reduction to 2% by June. The risk of inflation persistence But this calculus shifts dramatically if the initial inflation burst feeds into expectations. If businesses and workers begin to anticipate sustained price rises and adjust wage-setting accordingly, the ECB may be forced to act to prevent inflation from becoming entrenched. 'In this case, we find that the optimal policy could call for tighter monetary policy,' Stehn said. ADVERTISEMENT 'The ECB cannot afford to worry about the growth hit from tariffs in this scenario and needs to lean against inflation persistence.' Yet, he also suggested such second-round effects would need to be 'quite strong'—that is, involving a large and broad-based rise in long-term expectations—to justify such a hawkish shift. For now, wage-setting trends and inflation expectations remain benign enough, according to Goldman, for the ECB to consider easing. Related Tariffs and defence spending: S&P Global slashes eurozone and UK growth forecast EU response to tariffs may shift focus to US services Ruben Segura-Cayuela, economist at Bank of America, sees a similar path, albeit with a more cautious pace. 'It's probably not absurd to assume we could see a generic 20% on EU imports, as EU officials seem to think,' he said, referencing recent press reports. ADVERTISEMENT According to his estimates, such a move could put approximately 0.25 percentage points of euro area GDP at risk within a year, with more substantial losses possible if the EU retaliates. Segura-Cayuela sees retaliation as likely, but warns that escalation may move beyond goods. 'If the US 'entry bid' was particularly aggressive, escalation risks stretching beyond 'just' tariffs on goods, including EU action on US services, could feature more prominently,' he said. Such a move could be strategically appealing to EU policymakers if it shields more sensitive parts of the European economy. ADVERTISEMENT Bank of America maintains a high conviction that the ECB's first rate cut will arrive in April, followed by a reduction to a 1.5% deposit rate by September—though risks of a delay into December cannot be ruled out. As 2 April approaches, markets will closely watch how the ECB navigates this complex environment where tariffs exacerbate macroeconomic challenges.
Yahoo
31-03-2025
- Business
- Yahoo
How could the European Central Bank react to Trump's trade tariffs?
The European Central Bank (ECB) is bracing for renewed economic uncertainty as US President Donald Trump prepares to impose wide-ranging tariffs. On 2 April, the United States is expected to unveil a new round of 'reciprocal tariffs,' a key plank in President Donald Trump's renewed push to narrow America's trade deficit. While the exact scope and scale remain uncertain, speculation has intensified that the White House could impose tariffs of up to 25% on European goods. These duties would build on existing levies already applied to autos and parts, which have increased the cost of vehicle-related exports by as much as 50%. The potential impact is significant. In 2024, the European Union exported €382 billion worth of goods to the US, according to the International Trade Centre. Of this, €46.3 billion came from vehicles, including cars, motorbikes and parts. With the US accounting for roughly 10% of total EU exports, the bloc is especially exposed to transatlantic trade friction. According to estimates cited by ECB President Christine Lagarde, a 25% tariff imposed by the US could lower euro area GDP by 0.5 percentage points and push inflation higher by a similar margin in the first year—assuming the EU retaliates in kind. This presents a textbook case of a policy conflict: tariffs act as both a supply shock, by making imports more expensive, and a demand shock, by undermining confidence and disposable income. Policymakers in Frankfurt find themselves grappling with an uncomfortable paradox: should they support growth by easing monetary policy, or lean against the inflationary shock that such duties might unleash? Related Trade tariffs could push up eurozone inflation by 0.5%, ECB's Lagarde warns To economists like Sven Jari Stehn at Goldman Sachs, the answer hinges on the behaviour of inflation expectations. 'Our estimates suggest that US tariffs would have materially negative effects on growth with modest (and temporary) effects on inflation,' he said in a recent note. The standard policy playbook, Stehn noted, would argue in favour of rate cuts, as long as longer-term inflation expectations remain anchored. Goldman's models show that under such assumptions, the ECB's optimal strategy would be to 'look through' the inflation spike and thus lower interest rates. Goldman Sachs continues to expect the ECB to cut interest rates in April, followed by another reduction to 2% by June. But this calculus shifts dramatically if the initial inflation burst feeds into expectations. If businesses and workers begin to anticipate sustained price rises and adjust wage-setting accordingly, the ECB may be forced to act to prevent inflation from becoming entrenched. 'In this case, we find that the optimal policy could call for tighter monetary policy,' Stehn said. 'The ECB cannot afford to worry about the growth hit from tariffs in this scenario and needs to lean against inflation persistence.' Yet, he also suggested such second-round effects would need to be 'quite strong'—that is, involving a large and broad-based rise in long-term expectations—to justify such a hawkish shift. For now, wage-setting trends and inflation expectations remain benign enough, according to Goldman, for the ECB to consider easing. Related Tariffs and defence spending: S&P Global slashes eurozone and UK growth forecast Ruben Segura-Cayuela, economist at Bank of America, sees a similar path, albeit with a more cautious pace. 'It's probably not absurd to assume we could see a generic 20% on EU imports, as EU officials seem to think,' he said, referencing recent press reports. According to his estimates, such a move could put approximately 0.25 percentage points of euro area GDP at risk within a year, with more substantial losses possible if the EU retaliates. Segura-Cayuela sees retaliation as likely, but warns that escalation may move beyond goods. 'If the US 'entry bid' was particularly aggressive, escalation risks stretching beyond 'just' tariffs on goods, including EU action on US services, could feature more prominently,' he said. Such a move could be strategically appealing to EU policymakers if it shields more sensitive parts of the European economy. Bank of America maintains a high conviction that the ECB's first rate cut will arrive in April, followed by a reduction to a 1.5% deposit rate by September—though risks of a delay into December cannot be ruled out. As 2 April approaches, markets will closely watch how the ECB navigates this complex environment where tariffs exacerbate macroeconomic challenges. Sign in to access your portfolio
Bloomberg
24-02-2025
- Business
- Bloomberg
Stehn: German Election Result Complicates Fiscal Outlook
Goldman Sachs Chief European Economist Jari Stehn discusses the impact of the "complicated election outcome" in Germany on the economy. "It complicates the fiscal outlook," Stehn tells Bloomberg Television. (Source: Bloomberg)
