If the United States were to impose tariffs of 25% on all exports from the European Union (EU), Belgium's Gross Domestic Product (GDP) could decrease by 0.26% in the short term, according to an ING study.
US President Donald Trump imposed sweeping 25% tariffs on all steel and aluminum imported into the US on Wednesday. The European Commission retaliated within hours with countermeasures on US goods exports.
On the same day, ING published a study highlighting the direct effect of the US-imposed tariffs through reduced exports. The indirect impact on confidence and financial markets could further increase the negative GDP impact, the bank explained.
The US is Belgium's fourth-largest export market, with an export value of €28.03 billion in 2023, representing 7.6% of total exports. The relative importance of the US as an export market has grown over the past five years. Belgium's economy is mainly exposed to the US through pharmaceutical and chemical products.
Due to Belgium's strong integration into global value chains, its exports are not entirely domestically produced. Typically, Belgium's exports to the US contain 44% domestic value-added and 55% foreign value-added.
This global integration means Belgium's exports are indirectly exposed to the US through other countries. For example, a Belgian-produced car part installed in a German car that is then exported to the US, ING explains.
Short and long term scenarios
Belgium's direct exposure to the US is approximately 0.9% of its GDP, but through EU exports to the US, this rises to 1.54%. If tariffs were imposed globally by Trump, Belgium's total exposure to the US could reach 2.1% of GDP.
However, ING clarifies that this does not mean a loss of 2.1% of GDP if tariffs are imposed on the EU. Initially, tariffs impact direct trade flows.
For the short term (one to two years when production cannot readily adapt or new trade routes cannot develop), a 25% tariff will lead to a 19% drop in exports.
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For the EU, a 25% increase in import tariffs in the short term could lead to a direct GDP decline of 0.33%. The negative GDP effect could nearly double due to indirect effects such as loss of confidence and negative impacts on financial markets, says Ruben Dewitte, an economist at ING Belgium.
Should the tariffs remain in place for an extended period, the impact would be greater. The decline in exports between Belgium and the US could increase to 45% with a 25% tariff. The direct impact on Belgium's GDP could also rise to 0.69% with a 25% tariff.
