A Trump win would cause Dutch inflation rate to jump to 3.8 percent, analysts say

If Donald Trump wins the United States presidential elections next month and implements the higher import tariffs he promised during the campaign, it will result in Dutch inflation rising to between 3.0 and 3.8 percent. It will also cost the Dutch economy 5 to 10 billion euros in the long term. If Kamala Harris wins, the effect on the Dutch economy and inflation will be limited, Rabobank calculated.

The United States is an important trading partner for the Netherlands. Adjusted for re-exports, the U.S. is the fourth largest market when it comes to the export of Dutch goods. In 2023, the Netherlands exported 24 billion euros worth of goods to the U.S., making the country a more important trading partner than, for example, France, Italy, Spain, or China.

The policy course of Trump and Harris differs considerably, also when it comes to foreign policy. During the campaign, Trump indicated several times that he wanted to impose a higher general import tariff of 10 percent on foreign goods, with tariffs as high as 60 percent on goods from China. Harris, on the other hand, mainly emphasized the inflationary effect higher import tariffs have. “Although she probably will not reverse the protectionist policy from Trump’s first term, which is still in force.”

Rabobank calculated three scenarios for the outcome of the American presidential election. One for Haris, and two for Trump - a best-case and worst-case scenario.

The bank assumed that if Harris wins the election, she will introduce import tariffs on a limited number of goods from the EU in 2025. The average additional tariff on U.S. imports from the EU is 1.6 percent. The EU will likely respond with a 1 percent increase in import tariffs on American goods. This will have a limited impact on the Dutch economy and Dutch inflation.

In the best-case Trump scenario, the man will universally increase import tariffs by 5 percent. The EU will likely respond with higher import tariffs on U.S. goods. Given the EU’s dependence on the U.S., Rabobank expects a tariff increase of 1.5 percent on imported American goods. This scenario would increase Dutch inflation to 3 percent and, in the long term, result in the Dutch economy being 5 billion euros smaller.

In the worst-case Trump scenario, he increases import tariffs by 10 percent, and the EU responds with a 3 percent increase. This scenario would increase Dutch inflation to 3.8 percent and, in the long term, result in the Dutch economy being 10 billion euros smaller.

“If Trump wins the presidential election, it would be wise from a Dutch (and EU) perspective to prefer the negotiating table over a trade war. That is ultimately better for everyone,” Rabobank said. “If that is not feasible, the main thing is to strike back smartly so that the economic impact for Europe remains limited.”

“Also if Harris wins, it is important to continue to emphasize the benefits of trade,” the bank said.