Trump 2.0: The First 100 Days | EMEA

Tariffs Fuel Stagflation Scenario in 2025

Impact on CRE

• While the euro area is expected to avoid a recession, growth has been downgraded. Although the direct impact of U.S. tariffs on euro area growth is modest, the combined indirect effects—such as tighter financial conditions and heightened uncertainty— could significantly amplify the impact, with a 1% tariff hike potentially reducing GDP by 14bps. • The combination of tariffs—which could lead to rising prices—and monetary policy challenges, significantly increases the risk of stagflation in the UK, with Europe to follow. • That said, Europe enters 2025 with inflation pretty well under control, and central banks may decide to focus on growth concerns which may lead to further cuts. • A short-term stagflation scenario may weigh on property in 2025, but if growth weakens more than inflation, central banks could respond with more easing— potentially setting the stage for a rebound in 2026.

Stag…

…flation

1.6

4.0

1.4

3.5

1.2

3.0

1.0

0.8

2.5

0.6 % YOY

% YOY

2.0

0.4

1.5

0.2

0.0

1.0

2024Q1

2024Q2

2024Q3

2024Q4

2025Q1

2025Q2

2025Q3

2025Q4

2024Q1

2024Q2

2024Q3

2024Q4

2025Q1

2025Q2

2025Q3

2025Q4

Euro area HICP UK CPI

Euro area Real GDP UK Real GDP

Source: Cushman & Wakefield Research, Moody’s Analytics

CONTENTS

Cushman & Wakefield