Goldman Sachs cuts global economy’s growth forecasts after Trump win

Goldman Sachs has revised its 2025 growth forecast for the Eurozone from 1.1% to 0.8% and for the UK from 1.6% to 1.4% this week, citing President-elect Donald Trump’s tariffs.

The investment bank says Trump’s proposed protectionist trade policies could harm Europe’s economy, especially Germany’s, and predicts slower growth.

Goldman anticipates a 0.5% drop in Eurozone GDP, with Germany facing a 0.6% decline, Italy 0.3% and the UK 0.4%. The slowdown is expected to begin in early 2025.

The primary concern is Trump’s proposed tariff increase on European auto exports, primarily cars, which is causing uncertainty and potentially affecting business confidence.

Germany, heavily dependent on car exports, could see its growth rate reduced from 0.9% to 0.5%. The country’s largest car manufacturer and exporter, Volkswagen, could face challenges as the US remains a key market.

China is on alert
Trump’s trade war threats, including potential 60% tariffs on Chinese goods, have China preparing for a strong response.

Chinese President Xi Jinping has expanded economic defenses, introducing export controls on critical raw materials that could affect key American companies.

While China aims to avoid a tariff battle due to its reliance on exports, a full-blown trade conflict might force Beijing to implement substantial domestic stimulus measures.

Goldman anticipates Trump will opt for targeted tariffs rather than a blanket 10% tariff.

However, even limited tariffs could slow growth, with a full 10% one potentially cutting Eurozone growth by one percentage point.

Berenberg, another bank, slightly reduced its euro area GDP forecast by 0.1 percentage points, predicting 1% growth next year. 

Trump’s approach has raised global economic concerns and geopolitical uncertainty for European businesses.