Economists have warned that the growth of the Eurozone is threatened by the international trade war

According to a Financial Times poll of 72 economists, the two biggest risks facing the Eurozone economy in 2025 are a global trade war and possible regional political paralysis.

After returning to the White House on January 20, US President-elect Donald Trump has promised to impose tariffs of up to 20 percent on all US goods.

If Trump is true to his word, the tariffs would represent the largest increase in U.S. protection since the Great Depression and raise hopes of retaliation elsewhere.

Not only does the Eurozone, which has a large trade surplus with the US, face high tariffs, China is also threatened to dump cheap goods on the world market in response to Trump’s move.

“A second Trump presidency is the single biggest political and economic risk right now,” said Mujtaba Rahman, managing director of European analysts Eurasia Group. Europe is vulnerable to tariffs and Trump’s push to force an even more aggressive isolation from China.

A Trade conflict It is considered a given by economists polled by the FT that it will be triggered by US tariffs: 69 percent of respondents think this is likely, while 68 percent warn that such a scenario is the biggest threat to the environment next year.

Almost all respondents – 81 percent – said Trump’s second term would weigh on growth in the Eurozone.

Economists say the fallout from Trump’s trade policies could undermine them even before spilling over into Europe. “Expectations from Trump Tariffs . . . They provide a strong incentive for companies to hold off on investing until some uncertainty is resolved,” said Thomas Willadek of T Rowe Price.

On average, 72 percent of respondents expect. Eurozone economy To expand by only 0.9 percent. This is the third consecutive year of sub-par growth and is below the 1.1% forecast by European Central Bank staff in December.

But there is broad consensus that the single currency area will avoid a recession. John Llewellyn, a former senior economist at the OECD and now a partner at Free Economics, Lehman Brothers, is its biggest advocate.

Llewellyn, who predicted the eurozone economy would shrink 1 percent next year from the start, said: “At the moment, investors are unreasonably pessimistic about what President Trump might bring.”

“Economic stability is more fragile than the modern generation realizes,” he said.

A majority of economists polled – 61 percent – support ECB President Christine Lagarde’s call for EU policymakers to engage in trade talks with Trump against an all-out trade war.

“(The EU) can use the threat of retaliation as part of the negotiations. But ultimately tariffs are self-inflicted, and the EU is better off not using them, said BNP Paribas chief economist Isabelle Mathews y Lago.

Many economists point to the EU’s extensive experience in trade talks and its status as one of the world’s largest trading blocs. “The European Union is not in a weak position,” said Christian Dustman, director of the Rockwall Foundation, a Berlin-based economic think tank.

However, a minority warned that seeking a trade deal with the US would encourage more aggressive action. “Trump has a playground bully mentality,” said Kamil Kovar, senior economist at Moody’s.

Carsten Brzeski, head of global macro at ING Bank, said tariffs are not the only risk to the European economy emanating from the US in 2024. “US tax cuts, deregulation and lower energy prices make the US economy more attractive compared to the Eurozone economy.”

Next to geopolitical concerns, Europe’s inability to address its home-grown problems accounts for nearly a third of the total as a key risk.

Ulrich Cater, chief economist at Germany’s Decca Bank, said Europe may soon resemble “the late Habsburg Empire.” It was falling behind economically and technologically, stifled by bureaucracy and dominated by “the melancholic memory of its former greatness”.

When asked for reasons for optimism, one in five cited the prospect of lower interest rates and some increased consumer demand.

A similar share of analysts believe Germany’s snap election in February will bring changes to the country’s strict constitutional debt curbs and boost investment.

“If a new coalition can deliver a coherent reform program and raise the debt ceiling, the psychological stress in Germany could change,” said Moritz Kramer of German lender LBBW.

However, Marcel Fratscher, director of the Berlin-based economic think tank DIW, was less optimistic. “Don’t expect a new German government to hit the ground running and bring much-needed confidence,” he said.

While the centre-right Christian Democratic Union is poised to become a strong party, coalition negotiations are complex and could drag on for months. Moreover, CDU party boss and leading candidate Friedrich Merz has so far shown little appetite for changes to the debt brake.

Sadly, a fifth of economists hope the gloom will be a blessing in disguise as the situation is so bad that Europe can finally make the necessary reforms.

“A hostile global political environment presents an opportunity for European governance,” said Lena Komileva, chief economist at (g+) economics consultancy.

LBW’s Cramer said expectations are “so low right now that there could be some big surprises.”

Additional reporting by Alexander Vladkov in Frankfurt

Data visualization by Martin Stabe