US tariffs announced Wednesday are expected to have a significant impact on European banks, with economists warning of higher costs for consumers and fueling domestic inflation. The 10% tariff on all trade partners and further reciprocal levies will bleed into higher costs, stoking the risk of recession.
European banks, particularly those with significant US exposure, are feeling the pinch. Deutsche Bank warned that the euro area’s gross domestic product could suffer a hit of 0.4-0.8 percentage points due to the tariffs, larger than its previous forecast. The EU’s executive arm is working on a package of short-term economic proposals to support the region’s economy.
The US trade policies are also expected to disrupt European economies, with Poland warning that the levies could cost it 0.4% of its gross domestic product. European banks have already been battling declining interest rates and reducing loan demand due to the EU Central Bank’s rate cuts last year. The prospects of stifled European economic growth and disruptions in the dollar are also posing significant challenges.
Major European banks, including Deutsche Bank, Intesa Sanpaolo, and UniCredit, saw their share prices decline by 9-11% on Friday morning. In Switzerland, UBS shares fell 8%. Economists warn that a recession could have a material adverse impact on the US banking industry’s loan growth, credit costs, investment banking fees, trading profitability, and asset management fees.
Source: https://www.cnbc.com/2025/04/04/europes-banks-battered-as-trump-tariffs-put-us-recession-on-the-horizon.html