Trump tariffs could wipe out Europe's 2025 EPS growth, GS finds
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TRUMP TARIFFS COULD WIPE OUT EUROPE'S 2025 EPS GROWTH, GS FINDS
With prediction markets giving a 70% chance of Donald Trump being re-elected in November's U.S. presidential election, concern is rising over the economic and earnings impact of U.S. tariffs on Europe's export-oriented economy.
Goldman Sachs has done the maths, based on Trump's pledge to impose a 10% tariff on all U.S. imports. It concludes that euro area growth could take a 1-percentage point hit, which could potentially wipe out all European EPS growth next year.
"For Europe, the prime concern is tariffs," writes a team of GS strategists led by Sharon Bell.
According to the Wall Street bank, the economic damage would trickle down to earnings growth across Europe. Offsets such as a stronger dollar and U.S. tax cuts would be a small positive.
"Overall, we estimate the hit to Europe EPS would be about 6-7pp. If the entire impact came in 2025, this would be enough to eliminate any growth that year," they warned.
Goldman currently sees 4% EPS growth next year for Europe. Machinery/equipment, pharmaceuticals, chemicals and autos make up the largest share of European exports to the U.S., it notes.
If that weren't enough, tariffs against China could add another layer of stress to Europe Inc.
"There is also the potential for dumping of goods on Europe, especially from China if tariffs are imposed on goods going into the US. This has the potential to hit the Autos and Chemicals industries in particular," GS said.
(Danilo Masoni)
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