Trump's potential second term policies could have a deflationary effect on Europe.

From Investing.com: 2024-07-21 05:01:02

Citi Research predicts that Donald Trump’s policies may impact global markets, particularly in Europe, with his potential second term having a deflationary effect on the region. Tariffs, fossil fuel production, and trade policies could affect Europe’s demand while energy imports could boost supply and lower inflation.

Trump’s proposed policies could result in a complex economic scenario for Europe, with a potential decrease in inflation from lower energy costs offset by possible inflation from dollar appreciation. EU retaliatory measures and increased CO2 prices might counter some deflationary effects, but increased US borrowing could tighten financial conditions in Europe.

Citi Research highlights Europe’s susceptibility to US tariffs due to its €134 billion trade surplus with the US. The resolution of the war in Ukraine and lower-cost US fossil fuel exports could benefit Europe’s supply, while potentially dampening demand. The combination of these factors creates a challenging economic outlook for Europe, awaiting the outcome of the US presidential election.



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