Goldman Sachs Warns Trump Tariffs Could Slash EU GDP Growth
Goldman Sachs just dropped a bombshell analysis—and it's not about stocks or bonds. It's about old-school trade wars and their potential to kneecap the European economy.
The Warning Shot
Forget subtle market adjustments. The bank's modeling suggests a specific, incoming policy shift could directly shave percentage points off the EU's gross domestic product. This isn't a forecast of cyclical downturn; it's a projection of policy-induced contraction.
Mechanics of the Squeeze
The mechanism is brutally simple: tariffs act as a tax on trade, raising costs, disrupting supply chains, and stifling cross-border investment. The result? Reduced economic output, plain and simple. It's Econ 101, but with real-world consequences measured in billions.
Broader Implications
This analysis highlights a critical vulnerability in the traditional financial system—its deep entanglement in geopolitical maneuvering. While central banks fiddle with interest rates, a single political decision can rewrite growth trajectories overnight. It's a stark reminder that in global finance, the biggest risks often come with a pen, not a pivot.
As one cynical trader might note, it's almost impressive how efficiently protectionism can dismantle the prosperity that free trade built—all while the usual suspects collect fees on the volatility. The real 'shaving' here might be off investor portfolios, not just GDP reports.
Tariff increase will stifle trading activity
According to analysts at the global financial institution Goldman Sachs, the 10% tariff increase could reduce trading activity, causing a drop in real GDP in affected countries from 0.1% to 0.2%. The analysts predict that Germany will take the most damage at about 0.2% if it’s an incremental reciprocal tariff and 0.3% if it’s a blanket levy following the tariff deployment.
Sven Jari Stehna said the hit could be worse if the impact sends a Ripple through financial markets. The tariff increase has drawn backlash from Republicans in America, including U.S. senators Thom Tillis and Lisa Murkowski.
Both Tillis and Murkowski sharply criticized the tariff proposal until the U.S. is given the green light to purchase Greenland. A recent X post by Murkowski noted that the tariffs were unnecessary and a mistake after NATO allies deployed Military forces to the island in response to the threat.
Global markets react after Trump’s tariff threats
The escalating tensions have heated global financial markets, sending EU stocks and U.S. indices lower on Monday morning. On the other hand, safe havens like Gold and Silver rallied while risk assets like bitcoin fell sharply.
Analysts believe the likelihood of Trump implementing the additional tariffs remains low, and the current market sentiment is likely to be short-lived. The strategists also said that there exists a high chance that the UK and the U.S. will initiate negotiations to find a diplomatic solution to the ongoing crisis.
However, anonymous sources suggest the EU is currently in deep discussions to impose tariffs on €93 billion ($108 billion) worth of goods from the U.S., with additional measures beyond tariffs. Other people familiar with the matter said the bloc will initially pursue diplomatic measures to reach a consensus with the U.S. Goldman Sachs’ analysts also predict that the ongoing tension could have a small impact on inflation. They expect the central banks of the affected countries to lower interest rates to respond to the GDP outlook.
The U.S. government logged $264 billion in tariff revenue in 2025, a 234% increase from 2024. The monthly average of the second half of the year peaked at $30 billion, according to a previous report by Cryptopolitan.
Want your project in front of crypto’s top minds? Feature it in our next industry report, where data meets impact.
