Nicola Mai, Economist and Sovereign Credit Analyst at PIMCO, has commented on the US-EU trade agreement.
While not all details have been ironed out, we now have a good idea of what the US-EU trade agreement looks like following weeks of negotiations.
Prior to the announcement, our baseline was an all-in increase in tariffs on the EU of around 15 percentage points. What’s been announced looks very much in line with our expectations. According to our modelling, we think this will weaken Eurozone growth by almost 1 percentage point vs counterfactual, likely bringing growth to a near-halt over the coming couple of quarters.
However, the impact of trade policy uncertainty on corporate behaviour is difficult to estimate and we will continue to watch data closely to assess the degree of the upcoming slowdown and the likely policy response.
