Trump's tariffs hit Europe and China harder than expected - analysts
Kyiv • UNN
Barclays analysts warn that new US tariffs, especially for Europe and China, could lead to a recession. High tariffs and uncertainty create risks for corporate profits.
The latest round of US tariffs has hit Europe and China harder than expected. At the same time, analysts at the Barclays financial conglomerate warn that the scale of tariffs and ongoing political uncertainty could significantly increase the risk of recession, UNN writes with reference to Investing.com.
Details
According to strategists led by Emmanuel Cau, the announced tariffs were "more hawkish than expected", especially for European and Chinese exports.
The US has introduced average tariffs on goods from the EU at the level of 20%. This is twice as much as Barclays economists initially assumed, and total tariffs on Chinese exports could reach 54%.
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Barclays notes that while some commodity exemptions and hints of potential negotiations offer a glimmer of hope, "high tariffs and prolonged uncertainty increase the risk of recession."
Such an escalation could worsen the global outlook, against the backdrop of growth forecasts now facing increased negative trends, the publication points out.
The new trade environment also creates risks for corporate profits, it said. Barclays had already forecast European earnings per share (EPS) growth for 2025 at just 4%, below the consensus forecast of 6%, and now sees a further decline.
"Tariffs of around 20% will be a medium-high single-digit drag on EPS growth," analysts say.
Moreover, earnings for 2025 could turn out to be zero or slightly negative before recovering in 2026, the publication notes. According to strategists, stocks have partially cheapened due to concerns related to tariffs, but "to a lesser extent" due to recession risks.
Meanwhile, the S&P 500 index has reportedly fallen 8% from its peak, suggesting that about 25% of the recession is already priced in, but the Euro Stoxx 50 is still up 8% since the beginning of the year. This means that the European index "may have more chances to catch up if a recession becomes a reality," Cau and his team note.
"In the medium term, we believe that German fiscal stimulus should provide a positive offset and help Europe weather the tariff storm, while more aggressive ECB cuts may also be approaching," they added.
Sectors with high dependence on world trade and China, such as automotive and luxury goods, have already sharply reduced their performance, while defensive sectors such as telecommunications, utilities and REITs have performed better.
Banks are still leading in 2025, but Barclays warns that growing recession fears and expectations of lower rates could trigger profit-taking in this sector.
Addition
First Deputy Prime Minister - Minister of Economy of Ukraine Yulia Svyrydenko reported that the US introduced a 10% tariff for Ukraine. According to her, this is not critical. Our state is already working to ensure that the conditions are better.
