European Central Bank (ECB) President Christine Lagarde addressed the risk increased tariffs pose to European economies, referring to former President Donald Trump's economic policy positions if he were to re-enter the White House in 2025. Goldman Sachs senior equity strategist Sharon Bell and ING global head of macro research Carsten Brezski join Catalysts to discuss how a second Trump presidency would impact global economies.

Bell believes that if Trump were to enact a blanket 10% tariff on imports entering the US, "that would impact Europe quite severely by a number of routes. I think probably the biggest one is just global trade itself would weaken a lot. There will be a lot of uncertainty around it. You might also get more dumping into Europe from China."

She adds that tariffs may cause some disinflation in Europe, however, it would most likely contribute to a 10% hit to its GDP. With Trump gaining more ground in polling ahead of the November election, Bell has shifted her sector recommendations to be more defensive than cyclical.

Brezski adds that protectionist strategies globally have pushed Europe to adopt its own kind of protectionism, explaining, "We will see more industrial policy coming to Europe, which means that we will see at least governments trying to support and to subsidize certain sectors in Europe in order to at least keep some domestic growth momentum going in Europe." He explains that because Europe is so dependent on global trade with China and the US, an increase in tensions will reveal that "Europe is probably the place that suffers the most."

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This post was written by Melanie Riehl