Goldman Sachs has slashed its forecast for British and European economic growth next year amid fears Donald Trump will slap taxes on imported goods from around the world.
The investment bank now expects the UK economy to grow by 1.4pc next year, down from previous forecasts of 1.6pc.
It also predicts the eurozone will expand by 0.8pc, a downgrade from earlier forecasts of 1.1pc.
The bank’s economists warn that a fresh influx of US tariffs on imports from Europe will hammer growth, particularly if the latter retaliates with border taxes of its own.
That would knock 1pc from eurozone GDP, Goldman Sachs said, including 1.1pc from trade-dependent Germany and 0.7pc from Britain’s economy.
However, some of that would be compensated by extra spending on defence, as European nations prepare for Trump potentially scaling back American support for Ukraine.
“Taken together, our analysis points to a 0.5pc hit to real GDP in the eurozone, ranging from 0.6pc in Germany to 0.3pc in Italy, with a moderate 0.4pc hit to the UK,” said Goldman’s analysts, led by Sven Jari Stehn.
They predict that the bulk of the impact on growth will fall between the first and fourth quarter of next year.
Christian Schulz at Citi added that the impact will come not only from tariffs on goods sold by European businesses to Americans but also from those exported to China, which faces a mooted 60pc tariff on products sold to the US.
He said: “EU goods exports were worth 3.1pc of EU GDP in 2023, with a trade surplus worth 1.1pc of GDP. Germany and Italy would be more exposed than the EU average; France and Spain less.”
Xiangrong Yu at Citi said a full 60pc tariff on Chinese goods, as threatened by Mr Trump, would slash China’s growth.
He said: “A possible 60pc tariff could in theory make it prohibitive for Chinese goods to enter the US market. The growth impact could be around 2.4 percentage points under such an extreme scenario.”
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