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In a recent survey conducted by the ifo Institute's Economic Experts Survey (EES), economists on both sides of the Atlantic have shown significant discrepancies between the recommended tariff rates and the expected tariff rates on U.S.-EU trade.
According to the findings, U.S. economists expect an average tariff rate of 19% on EU imports by the end of the year, while advocating for much lower tariffs on EU goods, at only 3%. On the other hand, economists in Europe predict an average tariff of 18% on U.S. imports, with some countries like France, Spain, and Portugal anticipating tariffs between 20 and 25%. However, the lowest expected tariffs are in Sweden, Bulgaria, and Italy, ranging from 10 to 15%.
The significant discrepancies stem from high uncertainty about the future U.S. tariff policy, the complexity of global supply chains, and strategic behaviour by firms and policymakers reacting to political signals rather than fixed tariff levels.
One key reason is uncertainty about U.S. tariff implementation and future changes. Firms and markets are unsure whether announced tariffs will be implemented as planned or adjusted, leading to differences between expected tariff impact and recommended or nominal tariff rates.
Another reason is strategic trade policy actions and political negotiation tactics. The Trump administration’s tariff announcements are often part of broader trade negotiations, causing firms to anticipate but not immediately act on tariffs until implementation seems certain, resulting in timing and magnitude differences between recommended (policy-imposed) rates and expected market-impact tariffs.
The tariffs have also caused companies, especially German exporters, to reassess and postpone or cancel investments in the U.S. and Germany due to the resulting uncertainties, affecting trade volume expectations and creating a divergence between recommended tariff schedules and the actual economic responses or expected tariffs reflecting real costs.
Furthermore, sector-specific and regional variations contribute to the discrepancies. Some industries, such as automotive, machinery, and metal production, are more affected by tariffs and thus adjust expectations more markedly, while different German states feel the tariff effects differently.
Lastly, market and price reaction dynamics play a role. Importers and exporters often smooth price adjustments over time rather than absorbing sudden tariff cost increases at once, causing gradual shifts in expected effective tariffs compared to statutory or recommended tariff rates.
In light of these findings, ifo researcher Philipp Heil suggests that the results should serve as a wake-up call for politicians, highlighting the need for a well-founded and cooperative trade policy on all sides for stability in global trade. The survey results also reflect the EU's difficulties in agreeing on a common trade policy, underscoring the need for greater cooperation and understanding in the face of these challenges.
Other findings indicate that the tariffs' impact on businesses and finance is significantly influenced by political dynamics and general-news events. The unexpected tariff rates on U.S.-EU trade have created uncertainty for firms, leading to changes in investment decisions and general-news headlines about trade volume expectations. Moreover, the differences in expected tariffs among European countries point to the complexity of politics in shaping finance and business environments.
