Trump's possible trade policies raise concerns for EU and Dutch economies

With Donald Trump set to return to the White House, ING warns that his anticipated trade policies could threaten the Dutch economy as well as the broader eurozone. Trump's approach, expected to include tariffs on European imports, could push the eurozone toward recession, with the Netherlands vulnerable due to it's economy's reliance on exports.

Experts from ING have expressed concerns that Trump’s proposed tariffs, which may reach up to 20% on European goods, could hurt key industries like automotive manufacturing. Germany, the Netherlands' largest partner within the eurozone, would likely also feel the immediate impact of these tariffs, and disruptions in German exports would then ripple across the Dutch economy. “Germany is already struggling, and new tariffs on European cars would be especially harmful,” ING’s report stated, adding that Trump’s unpredictable stance on NATO and foreign policy could further promote economic instability within the region.

Trump’s plans for heavy tariffs—ppotentially 60% on Chinese imports and 20% on goods from other countries—aim to boost domestic production in the United States. However, this could strain European exporters, affecting industries from technology to machinery. European policymakers are expected to delay responses until Trump's specific trade actions become clearer. In the meantime, the European Central Bank (ECB) may consider interest rate cuts to support the eurozone economy, with analysts forecasting first cut as early as December.

In addition to trade tensions, Trump's economic policies, which emphasize tax cuts, immigration restrictions, and protectionism, could lead to increased borrowing costs globally and a stronger U.S. dollar. This shift would place further pressure on the euro, making exports from the Netherlands and other eurozone countries more expensive and potentially dampening demand. Additionally, ING economists predict the ECB could respond to early signs of an economic slowdown with a 0.5% rate cut in December, aiming to support eurozone growth amid heightened unpredictability.

Bond markets have already shown signs of volatility in response to the election. Although the U.S. yields have spiked, European bonds have remained relatively stable. ING’s analysis suggests that if Trump continues to pursue aggressive trade policies, the eurozone could see a broader “risk-off” episode, with investors turning toward safer bonds like Germany’s Bunds.