ECB Warns Tariffs Are Fueling Inflation Fears in Europe
Across Europe, families are changing the way they spend. From skipping American-made products to trimming non-essential purchases, consumer habits are shifting under the weight of Washington’s trade measures.
The European Central Bank says these changes aren’t just anecdotal – they’re quantifiable and spreading.
The ECB’s latest survey highlights how President Trump’s tariffs, first unveiled in April, have filtered into household psychology. Roughly one in four people now anticipate slower growth, while nearly 40% believe prices will climb because of higher import costs. For many, that translates into pulling back on purchases and rethinking financial plans.
What alarms policymakers most is how persistent people expect the shock to be. Even long-term inflation forecasts, which usually remain steady, have inched higher among respondents convinced tariffs will push up prices. At the same time, those who see recession risk have cut their growth outlooks twice as sharply as their peers.
Who Cuts and Why
Not every household is reacting in the same way. Wealthier families tend to substitute away from U.S. goods, while lower-income groups are reducing overall consumption. Essentials like food and rent remain steady, but discretionary purchases – travel, electronics, leisure – are being scaled back. Sixteen percent of households said they are already spending less overall.
The central bank interprets the divide as a sign of uneven stress. Some Europeans are adapting by switching brands, others are simply buying less. But the common thread is caution, a mood that risks dragging on growth if it persists.
Markets Watch for a Rebound
Despite consumer unease, analysts see potential for improvement. JPMorgan strategist Mislav Matejka pointed to a possible recovery in Eurozone earnings and buybacks next year, which could cushion the impact of the trade war. The Stoxx 600 has risen 9% this year, still trailing the S&P 500’s 13%, but forecasts call for an 11% rebound in 2026 profits.
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