Trump win would hammer growth and send inflation soaring in Europe, ECB official says

• A Trump win would pose risks to economic growth and inflation in Europe, ECB member Joachim Nagel says.
• Nagel points to Trump’s plans for high tariffs, expansionary fiscal policies, and immigration restrictions.
• Europe’s economy has dragged in recent months as Germany faces a potential recession.

With five weeks until the US presidential election, economic policy experts in the US and abroad are holding their breath as they calculate the candidates’ potential impact.

Officials in Europe, for their part, are warily eyeing what a Donald Trump win would mean. European Central Bank Governing Council members are bracing themselves for a potential win by the former president, warning that a second Trump term could create a huge drag on Europe’s economy.

Speaking at a conference in Berlin on Tuesday, ECB member Joachim Nagel said a Trump victory would risk economic growth and higher inflation in Europe, Bloomberg reported.

“An election of Donald Trump could be accompanied by drastic tariff increases, an expansive fiscal policy, and a strong restriction of immigration,” Nagel said.

Trump has proposed sweeping tariffs on imports, and has even said he’d hit US firms with huge tariffs on goods manufactured abroad.

“If Trump’s announcements were implemented, this could lead to noticeable losses in growth in the eurozone and in Germany,” he added.

Nagel pointed to heightened inflation risk in both the US and Europe, warning that Trump’s policies would likely spark fresh inflation in the US as tariffs get passed on to consumers.

The Federal Reserve would possibly be forced to raise interest rates again in response, which would devalue the euro and increase import prices in Europe. The spillover effect would be higher inflation for the continent, Nagel said.

“In this scenario, the sharp shift in US economic policy could also bring inflation risks for the euro area and Germany,” Nagel said.

Nagel said there’s particularly heightened risk in Germany due to the country’s strong trade relations with the US. Germany was Europe’s largest exporter to the US in 2023, surpassing Italy—the number two exporter in the EU—by more than twofold, according to Eurostat data.

Germany already faces a potential recession, and as Europe’s biggest economy, it’s been a drag on overall growth for the continent. Further weakening could pose outsize risks to the greater macro picture in Europe, Nagel’s comments suggest.

Nagel also highlighted the general uncertainty that would ensue in the case of a Trump win, which he says could encourage companies to hold back on investments.

Neither Trump nor Harris has given crystal clear plans for how they would handle the economy, but Harris has outlined her “Opportunity Economy” in greater detail than Trump has explained his proposed tariffs, which include a 10% tariff on virtually all US imports, and tariffs as high as 60% on Chinese goods.

Nagel said a win by Vice President Kamala Harris, on the other hand, would likely mean greater continuity in trade and economic policy.

“Compared to Trump’s agenda, Harris’ proposals would likely have manageable macroeconomic effects and spillover effects,” he said.

Nagel’s comments come just weeks before the US presidential election and follow previous warnings from ECB members about the potential impact of a Trump win.

Back in January, ECB president Christine Lagarde said a Trump win is “clearly a threat” to Europe considering the policies he implemented during his first term in office. She pointed to Trump’s tariffs, commitment to NATO, and climate change policies, which she said were misaligned with European interests.