US-EU trade deal ‘better than expected’

The US-EU trade deal proposed on 27 July will help reduce policy uncertainty and downside risks to Europe growth, finds Nick Brooks, Head of Economic and Investment Research, ICG. Although there are still a number of details to be worked out and a legally binding text still needs to be agreed upon, the announced policies give helpful clarity to the expected outcome of the final agreement.

Regional economic impact

The 15% tariff announced for most EU exports to the US is likely to have minimal negative impact on EU gross domestic product (GDP) growth. Meanwhile, the European Union’s exported goods exports to the United States constitute less than 3% of EU GDP. Plus, the majority of Europe’s economic activity is in the service sector (see table below). 

Based on data from the Private Company Database of ICG, in the main, private markets investments are focused in services businesses. These are not directly affected by US import tariffs, which limits US tariffs’ impact on private markets investors (see chart below). 

National economy and sector impact

Independent estimates put the one-time hit to the EU economy from the trade tariffs at 0.3%-0.5% of GDP:

• Germany faces the largest hit
• France and Italy are seeing a more limited impact
• Spain faces little to no impact

The impact is expected to be highly sector specific (e.g. the automotive,  chemicals, metals and parts of pharma sectors, with most other sectors unscathed). See the table below for individual country and sector exposures.

Europe economic exposure to US tariffs is low, with a few vulnerable sectors

ICG Private Company Database: Limited private markets exposure to sectors affected by US tariffs

Go deeper

• Read the fully analysis, with additional charts, on the ICG website: Trade War Update: US-EU trade deal reduces policy uncertainty and downside growth risks
• Explore ICG’s global footprint
• Find out how private companies performed last year

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