Europe’s policy options in the face of Trump’s global economic reordering
Sander Tordoir, Shahin Vallee, Oliver Reiter, Robert Stehrer
Economic Governance and EMU Scrutiny Unit3/1/2025·DOI·Read paper
Abstract
In this paper, we propose and analyse four scenarios of a second
Trump administration’s economic policy and its impact on
Europe, ranging all the way from moderate tariffs to full trade
war, a full multilateral breakdown with the US leaving the IMF
down to a more cooperative exchange rate realignment
agreement. We assess two trade scenarios quantitatively and
outline broader policy shocks and their economic consequences.
Our findings highlight significant challenges for the ECB, requiring
responses to trade disruptions, financial instability, and potential
global economic reordering. We offer specific policy
recommendations for the ECB to navigate these uncertainties.
This document was provided by the Economic Governance and
EMU Scrutiny Unit at the request of the Committee on Economic
and Monetary Affairs (ECON) ahead of the Monetary Dialogue
with the ECB President on 20 March 2025.
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