Leading Bulgarian financial expert Simeon Dyankov presented a large-scale study that reveals serious economic challenges facing the European Union in the context of new trade relations with the United States.
According to an in-depth economic analysis, the projected decline in the EU's gross domestic product amounts to approximately 0.5 percent annually. This macroeconomic effect is expected to cause a cascading effect on the union's fiscal balances, with potential losses between 75 and 80 billion euros.
Direct financial consequences include direct tariff losses in the range of 3-5 billion euros. With a typical tax elasticity of 0.4 percent, the economic downturn translates into a reduction in tax revenues by about 0.2 percent, which is equivalent to approximately 30 billion euros annually.
The damage from trade transformation will be unevenly distributed among different European countries. Exporters such as Germany, Ireland, the Netherlands, Belgium, and Italy will suffer the most significant economic losses, while Eastern European countries like Bulgaria will be relatively less affected.
Additional pressure on the economy is expected from increased energy import costs. Government subsidies to compensate for energy prices could reach between 0.3 and 0.5 percent of gross domestic product, which is equivalent to about 45 billion euros annually.
Fiscal deficits will vary significantly among member states. For leading exporters such as Germany, the Netherlands, and Ireland, an increase of 0.6-0.8 percent of GDP is forecast. France, Spain, and Italy could see an increase of 0.3-0.5 percent, while smaller countries like Bulgaria expect a more moderate increase of 0.1-0.2 percent.
During negotiations with US President Donald Trump, European Commission President Ursula von der Leyen achieved a series of key agreements:
- Introduction of a 15-percent "comprehensive" tariff on about 70 percent of EU exports
- Reduction of automotive tariffs from 10 to 2.5 percent
- Commitments to purchase American energy resources for 638 billion euros by 2028
- Planned investments of about 600 billion dollars in the American economy
Expert Dyankov expects the European Commission to show flexibility and treat part of the expenses as one-time, related to guaranteeing energy security.