The European Central Bank published Economic Bulletin analysis using its June 2025 Consumer Expectations Survey showing that recent trade tensions and tariff announcements are materially shifting European households’ expectations for inflation, finances and growth and are prompting changes in consumption behaviour. A population-weighted net balance of 40% of respondents viewed the tariffs as inflationary, while net balances of 13% and 24% expected a negative impact on their household finances and on economic growth respectively. Among respondents who saw tariffs as inflationary, inflation expectations rose versus January 2025 by around 0.2 percentage points at the one-year horizon, 0.13 percentage points at three years and 0.06 percentage points at five years; those viewing tariffs as recessionary cut their 12-month growth expectations by 0.4 percentage points (versus a 0.2 percentage point decline for others). Behaviourally, 26% reported switching away from US products and 16% reduced overall spending, with higher-income and more financially literate households more likely to switch products and lower-income or less financially literate households more likely to cut consumption; the spending reductions were driven entirely by discretionary items, with necessities largely unchanged.
European Central Bank 2025-09-22
European Central Bank research links tariff tensions to higher household inflation expectations and cuts in discretionary spending
The European Central Bank's Economic Bulletin shows that trade tensions and tariffs are altering European households' expectations for inflation, finances, and growth, affecting consumption. A net 40% viewed tariffs as inflationary, with expectations rising by up to 0.2 percentage points at the one-year horizon. Additionally, 26% switched from US products, while 16% reduced overall spending, mainly on discretionary items.