Eurozone Consumer Confidence Declines Amid Tariff Uncertainties

Trump has vowed 25 percent tariffs, saying the European Union has taken advantage of the United States.

A statue of the Greek goddess Europa holding the Euro symbol at the European Parliament building in Brussels, Belgium, on July 21, 2023. Lavinia Savu/The Epoch Times

Consumer sentiment across Europe became more negative this month as many people remain uncertain about the region’s economy amid tariff negotiations between the European Union and the United States.

The Consumer Confidence Indicator (CCI) for the EU fell by 1 percentage point to -13.9 in March, the European Commission said in a March 21 statement.

“Consumer confidence veered further away from its long-term average again,” the Commission said.

A March 21 report from McKinsey & Company had also found muted consumer sentiment across Europe. The report analyzed data from five countries—France, Germany, Italy, Spain, and the United Kingdom.

“On average, half of consumers in Europe had mixed feelings about the economy. Nearly one-quarter of consumers felt optimistic—though just as many felt pessimistic,” the report said.

Rising prices/inflation was cited as the top concern, with other major issues being immigration and international conflicts.

“Looking ahead, the outcome of elections in Germany, international relations, and tariffs could affect how consumers across these five European nations feel about their wallets,” the report said.

The EU consumer confidence dipped as a tariff dispute between the bloc and the United States is brewing.

President Donald Trump has threatened to impose 25 percent tariffs on the region. Earlier this month, the U.S. administration implemented 25 percent tariffs on aluminum and steel imports.

This triggered the EU to announce tariffs on the United States, targeting 26 billion euros—approximately $28 billion—worth of American goods.

Late last month, Trump said the plan to impose 25 percent tariffs was because the countries in the bloc don’t buy U.S. goods.

“They don’t accept our cars. They don’t accept, essentially, our farm products. They use all sorts of reasons why not and we accept everything of them,” the president said.

He said the European Union was formed to take advantage of the United States. “That’s the purpose of it and they’ve done a good job of it—but now I’m president,” he said.

The EU charges 10 percent tariffs on passenger cars, which is four times the 2.5 percent tariff instituted by the United States.

Economic Impacts

During a March 20 speech, Christine Lagarde, president of the European Central Bank (ECB), said the Trump administration’s tariffs on the EU are expected to negatively affect the bloc.

According to an ECB analysis, a 25 percent tariff charged by the United States on European imports could lower growth in the euro area by roughly 0.3 percentage points in the first year, she said.

If Europe retaliates by raising counter-tariffs, the negative impact on euro area growth will be half a percentage point.

“The brunt of the impact on economic growth would concentrate around the first year after the rise in tariffs; it would then diminish over time, however leaving a persistent negative effect on the level of output,” Lagarde said.

“In such a scenario, the inflation outlook would become significantly more uncertain,” she added. “In the near term, EU retaliatory measures and a weaker euro exchange rate—resulting from lower U.S. demand for European products—could lift inflation by around half a percentage point.”

Italian Prime Minister Giorgia Meloni cautioned about possible fallout from a tit-for-tat situation.

“I believe that it is not wise to fall into the temptation of reprisals that become a vicious cycle in which everyone loses,” Meloni said before the Italian Senate this past week.

“I am convinced that we must continue working concretely and pragmatically to find common ground and avoid a trade war that would benefit no one, neither the United States nor Europe.”

Meloni said that tariffs may end up boosting inflation, reducing the purchasing power of families across Europe, and triggering central banks to push up interest rates, thus negatively affecting growth.