MacroPolis

The worst possible scenario for the Trump tariff policy materialised this week as the US announced reciprocal tariffs across the globe, with the EU being hit with 20 pct on its products sold to the US.

This comes following the 25 pct tariffs imposed on aluminum and steel imports to the US and the 25 pct charge on imports of automobiles and auto parts.

The EU exports some 1 million passenger vehicles to the US, which in 2023 reached a total of over 40 billion euros, representing roughly a quarter of EU total car exports.

The EU’s total iron and steel exports in 2024 came to 32.3 billion euros, with the US being the second largest market with a 5.4 billion euros share.

It is estimated that over 400 billion euros of EU exports to the US will be affected by the newly introduced reciprocal tariffs.

It is evident that we are no longer discussing the prospect of a possible global slowdown due to uncertainty and trade frictions but the prospect of international trade being seriously squeezed and the global economy facing the prospect of recession.

As we had argued in a February newsletter, Greece’s direct trade with the US might be limited, but it has a major exposure to EU trade. This means the channel of economic slowdown for Greece will come from trade partners in Europe.

In 2024, Greek exports to the US reached 2.41 billion euros, from 2.12 billion euros in 2023, running a small surplus of 268.2 million euros.

For industrial products fuels lead with over half a billion euros, followed by cement with 93 million and aluminum sheets with 91 million euros. For agricultural products, olive exports were 212 million in 2024, while cheese and olive oil were 74 and 68 million euros respectively.

Industrial products make up roughly 42 pct of Greek exports to the US, while agricultural and food products were close to 31 pct.

In an estimate last month, Bank of Greece had assumed 10 pct tariffs on EU goods and that would make Greek products 7 pct more expensive in the US, leading only to a marginal drop of GDP by 0.05 pct, while when second-round effects are included, the overall impact could reach 0.4 pct of GDP by 2026.

However, our view was always that Greece would experience serious second-round effects even before the latest tariffs were announced this week.

Greek exports had a difficult time in recent years, as total exports continued to decline, falling by 2.2 pct in 2024, after falling by 8.5 pct in 2023. Greece's total exports fell below 50 billion euros, down from 55.76 bn in 2023, although the picture improves once oil products are excluded.

Looking at total exports, trade with EU countries amounted to 27.43 billion euros and with third countries to 22.48 billion euro. If the value of oil products and ships is excluded, the EU plays a much more important role in Greek trade, accounting for 23.42 billion against12.48 bn with third countries.

Food and live animals dominate Greek exports to the EU at 5.72 billion euros, followed by fuels at 4.82 billion and manufactured goods at 4.66 bn. Exports of chemicals amounted to 4.05 billion.

The EU also plays a prominent role in trade in services, with 11.95 billion euros out of a total of 21.7 billion of travel receipts last year coming from European Union countries, led by Germany with 3.7 billion and France with 1.26 billion. Travel receipts from the USA amounted to 1.58 billion.

Of the 35.95 million visitors in 2024, 21.8 million travellers came from the EU. German visitors topped the table with 5.4 million visitors.

The outlook for the eurozone this year was already subdued with the EU according to the latest forecasts by the European Commission expected to grow by 1.7 pct and the eurozone by 1.5 pct. This comes after two years of anaemic growth that for the EU was just 0.5 pct in 2023 and 0.9 pct in 2024. The same figures for the eurozone were 0.5 and 0.8 pct.

Germany is expected to grow by a modest 1.2 pct this year, while Italy and France were also seen in the winter forecast growing by the same rate.

In the new landscape, Greece’s major trading partners in the EU are facing even the prospect of recession and it is certain that this will be felt in Greece through the channels of receipts from exports of manufactured goods and tourism.

Commenting on the latest trade decisions in the US, PM Kyriakos Mitsotakis said that the emerging trade war will hurt everyone. However, he offered reassurance that the Greek economy will hold and face the challenges with prudence, a structured approach, and an active role in the formation of EU decisions.

There is a high probability that Mitsotakis and his ministers might have to go back to the drawing board and recalibrate their assumptions on growth and fiscal planning.