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What tariffs have been imposed on Europe?

Last Wednesday, the US revealed a series of reciprocal tariffs, upending global trade. The European Union (EU), America's largest trading partner, will face a 20% tariff. However, the EU fared better than countries like China, which faces a 104% tariff, and Vietnam, with a 46% tariff.

One positive is that the new tariffs treat the EU as a single trading bloc. President Trump could have sewn more discord for Europe had he applied different rates to different countries, pitting them against each other.

What action have European leaders taken?

Today, the European Union announced the approval of tariffs on approximately 鈧�21 billion worth of US goods. This move is in response to the 25% duties that President Donald Trump imposed last month on the EU's steel and aluminium exports.

The extra tariffs are due to take effect in mid-April. The tariffs will target a range of products from soybeans to diamonds, agricultural products, poultry, and motorcycles.

The European Commission, the EU's executive body, stated that these countermeasures could be suspended at any time if the US agrees to a fair and balanced negotiated outcome.

What next?

More volatility, more negotiations, more uncertainty鈥�. in the short term at least. Spanish Prime Minister Pedro Sánchez is advocating for the EU to build closer ties with China.

Meanwhile, Italy鈥檚 Prime Minister Meloni is heading to Washington on 17 April. Meloni will propose eliminating tariffs on bilateral trade between the EU and the US, an idea also mooted by Elon Musk last weekend. It is understood Meloni has been coordinating with EU Commission President Ursula Von der Leyen on the issue.

Achieving zero tariffs would be a major step forward but ironing out trade deficits, another Trump goal, will be more challenging. Data from Capital Economics shows Ireland is by far the most exposed euro-zone country to US tariffs. Among the larger countries, Germany and Italy are more vulnerable than France and Spain.

What about Europe鈥檚 economy and housing markets?

The 20% blanket tariffs could reduce Eurozone GDP growth by 0.03% over the next two years when only focusing on the direct and indirect trade impact.

The prospect of weaker growth means the European Central Bank (ECB) is now expected to cut rates three times this year, a week ago economist were predicting two rate cuts. This means the base rate would sit at 1.75 by the end of the year not 2.0, potentially good news for mortgage holders across the bloc.

Supply chains are likely to be disrupted which would impact housebuilders and contractors potentially pushing up the cost of raw materials and impacting housing completions; a similar scenario to that witnessed during the pandemic.

Although the immediate concern is in relation to growth and reducing rates, tariffs are likely to have an inflationary impact. This will create a headache for the ECB and other central banks who will need to balance the need for lower rates to stimulate growth with the pressure to raise rates to stave off inflation.

According to Eurostat, half of the Eurozone still has inflation above 2%.

Any opportunities?

As markets adapt to the prospect of a US recession the dollar will come under pressure and as the world鈥檚 reserve currency this will have repercussions for global currency markets.

Shifts in the euro suggest global investors were already repositioning towards Europe prior to the tariff announcements. In March, the euro posted its largest three-day gain since late 2022 on the news that Germany鈥檚 plans to loosen constitutional borrowing limits to free up as much as 鈧�220 billion for defence and infrastructure.

We may see UHNWIs and investors hold more cash than usual to enable them to act fast when opportunities arise, and property as a tangible and less liquid asset class may add to its appeal in the coming months.

With wealth more globally mobile than ever, Europe鈥檚 safe haven credentials may be back in the spotlight. Plus, with the UK non dom regime coming to an end this month, some UHNWIs may look to Europe鈥檚 established markets that offer a range of soft factors including good governance, the rule of law, security, privacy, market transparency, relatively low purchase costs and good international schools.

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