The looming trade tensions between the United States and the European Union are casting a shadow over economic prospects in Europe, with the Netherlands expected to face direct repercussions and Germany once again drawing criticism over its sustained export surplus to the US.
According to ING's latest economic forecast, the Dutch economy is projected to grow by 2.1% in 2025, before slowing to 0.8% in 2026, driven largely by strong domestic demand. However, 'uncertainty about US economic policy (trade in particular) and the resulting slowdown of worldwide growth is set to suppress exports and investment.'
The threat of new US tariffs targeting EU goods arrives amid growing geopolitical and financial market instability. ING economists warn that this is likely to dampen global trade activity, particularly impacting export-driven economies like the Netherlands and Germany.
Germany, the EU's largest economy, has been running a consistent export surplus with the US for 33 consecutive years, according to data released by the Federal Statistical Office (Destatis). 'Germany has indeed exported more goods to the United States than it has imported from there for 33 years. 1991 was the last year in which an import surplus was recorded,' the agency stated. The historic imbalance has prompted criticism from the US government and is believed to partly underpin Washington's latest protectionist stance.
ING economist Marcel Klok noted that 'for the Netherlands, we have estimated the direct negative trade effect (both direct and indirectly via other economies) from the current scenario of US import tariffs on European products to be -0.1% GDP for the short run (which could deteriorate to -0.3% over time when American purchasers find new domestic substitutes).'
Despite low consumer confidence, Dutch households are expected to continue spending, supported by real income growth and government policy. 'Household spending growth this year and next is being supported by income growth that is outpacing inflation, as well as government measures that are boosting purchasing power,'ING reported.
Investment patterns are also undergoing correction following a period of front-loaded purchases in transportation equipment and a major restocking of gas reserves. While investment growth should gradually resume, these one-off factors will weigh on near-term growth figures. 'The earlier transportation equipment investment boom will weigh on investment growth in 2025, while an unusually high gas restocking will suppress GDP by raising imports,' ING explained.
Labour market tightness, inflationary pressures, and supply-side constraints remain persistent features of the Dutch economy. 'Headline HICP consumer price inflation remains above the normal pace, at 3.1% year-on-year in 2025, falling to 2.5% in 2026,' with wages still growing at 4.5%-5%, supporting service inflation.
In conclusion, ING cautions that 'the most prominent risk to the Dutch economy is the uncertainty of the trade war,' adding that, 'Trade barriers reduce efficiency while uncertainty hurts confidence, spending, and potentially affects financing costs and stability.'
With both the Netherlands and Germany in the trade spotlight, EU economies may face increasing pressure as US protectionist measures evolve.
More information:
ING
www.think.ing.com
Destatis
www.destatis.de