The new US tariffs are particularly impacting the industry in Austria. According to a Friday analysis by Wifo, the tariffs could lead to a 2.3% reduction in the vehicle manufacturing sector’s economic output. Overall, the country’s GDP could decrease by 0.23% in the short term, while also dampening inflation. Economists at Raiffeisen Research and the Austrian National Bank (OeNB) are also working on assessing the potential effects.
The drop in the vehicle manufacturing sector corresponds to a loss of 616 million euros, writes Wifo economist Hendrik Mahlkow. In the steel and iron industry, the decline is even more significant, with a 2.5% decrease, equating to a 422 million euro loss in value-added production.
The expected decrease in US demand for Austrian products leads to a negative impact on the Gross Domestic Product (GDP) of 0.23%. Furthermore, the overall effect increases to 0.33%, considering medium-term effects, such as a slowdown in the global economy, as explained by Wifo economist Harald Oberhofer.
Inflation Impacted as Well
Due to lower demand, inflation is also being restrained. Wifo predicts a 1.1% lower price level. However, predicting the price effects is difficult, as the tariffs would also lead to shifts in global exchange rates, says Oberhofer.
For the US itself, Wifo economist Mahlkow forecasts a negative GDP effect of 1.7%, with inflation expected to rise sharply to 7.3%.
Raiffeisen Research Lowers Eurozone Forecasts
Raiffeisen Research’s economists forecast negative GDP effects in European countries ranging from 0.2% to 0.9%, depending on the country. They have revised their growth forecast for the Eurozone in 2025 from 1.2% to 1.0%. For 2026, the forecast is reduced from 1.7% to 1.5%. The previous forecast already included a tariff “around 10%”.
Due to exceptions for specific products, the Raiffeisen economists believe the tariff regime is structured so that the US will likely maintain it for some time. “The focus on trade deficit reduction also suggests that the goal is not only to create negotiation space for tariff reductions but also to sustainably change global trade flows and value chains, with structurally lower US imports and a shift of production to the US,” they stated. They expect “tough negotiations.”
OeNB Analyzes the Role of the US Dollar
The OeNB also analyzed the strategy behind the US tariffs and examined plans by Trump-aligned economist Stephen Miran, which aim to end the structural overvaluation of the US dollar with the long-term goal of reindustrializing the US. “Through the US dollar’s role as the global reserve currency, the US benefits by making it easier to sanction countries or finance its national debt more cheaply. However, the constant demand for US dollars for reserve purposes also leads to the overvaluation of the currency, resulting in ongoing US current account deficits, as it makes US exports more expensive and imports cheaper,” according to a blog post by the Austrian National Bank. “In this context, the idea of a strategic Bitcoin reserve for the US government should be considered: If more countries held Bitcoin instead of US dollars as reserves, the US dollar exchange rate could weaken.”
