Short comments
World economy: Decent economic data
The economic data currently point to largely stable economic trends in Europe and Asia. In the US, there are few signs of weakness. In the eurozone, stabilisation in the industrial economy is a positive, although the data are partly influenced by advance purchases due to expected higher US tariffs starting in August. These advance purchases will cease in August at the latest, and the global industrial sector is likely to experience some dip.
We continue to expect US import tariffs to be significantly higher than at the beginning of the year, which is evident in recent deals of the EU and Japan with the US (both deals encompassing a US import tariff rate of 15%). The higher tariffs (which are taxes on imports) will have to be absorbed by companies exporting to the US, US importers and ultimately US consumers when the higher duties are passed on. Based on export price indices of US trading partners, anecdotal evidence from US companies and the US goods consumer price index (some segments exhibiting a high import content recorded significantly higher prices in June), all ofthe aforementioned playersare currently bearing part of the increased tariff burden.
In our base scenario, we see some disruption to economic activity due to tariffs, particularly in the US, but no slump. While the tariff effect in the US is likely to lead to a certain loss of momentum in the coming months, higher tariffs will be offset by falling tax rates for private individuals in the coming year. In the US, the decline in immigration is likely to lead to a certain loss in potential growth. The current low oil prices are slightly positive, especially for US consumers.
In Europe, the tariff effects are lower than in the US, and higher government spending, primarily in Germany, is supporting the economy. China’s government is keeping the economy on track in line with its targets.
In the medium term, we would not overestimate the impact of changes in tariffs and world trade. We thus see no need for a major reassessment of the global economic outlook in the medium term.
Company earnings for the second quarter are above expectations in the US, which is reflected in an upward trend in earnings forecasts (12m forward in the chart). In Europe, earnings came in about as expected, with the weak US dollar weighing.
The impact of US import tariffs has been discussed by many companies in recent months and appears to be manageable for most companies. Nonetheless, some negative surprises are likely in the third and fourth quarter.
According to analysts’ estimates, double-digit growth rates in corporate profits are to be expected in both Europe and the US this year and next. (August 2025)
US economy: Loosing momentum
In the US, the impact of taxes and government spending is currently more relevant for the economy than usual. The burden of tariffs (a tax on imports) on businesses and private households has been rising. Corresponding one-off effects are likely to weigh on the economy well into next year. Though next year, we expect lower tax rates to increasingly offset the negative effects of tariffs. Declining immigration will cause a structural loss in growth momentum.
The fact that goods price inflation remained largely unchanged in April and May, despite tariff increases, puts this year’s risks for consumers into perspective. Nevertheless, a moderate slowdown in the economy is evident in recent consumption and labour market data. (July 2025)
US tariffs: Unreflective in favourof domestic industry
A well-flagged goal of US economic policy is the expansion of the industrial sector. Of the 160 million jobs in the US, some 138 million are in the service sector (including the government) and 22 million are in industry (which includes the construction sector). The proportion of people employed in industry fell from just under 35% in 1965 to 14% in 2010 and has remained roughly stable at this level since then. The expansion of industry is a backward-looking goal but one that resonates well with important sections of Donald Trump’s electorate.
The simple reasoning is that increasing the share of the industrial sector requires imports of goods to drop and exports to rise (foreign trade in services plays no role in this context). Imports of goods will fall if tariffs are increased. In the tariff announcements in early April, the focus appears to have been more on media attention than the consequences of the strong rise in tariffs. As a side effect, the share of customs duties in the US federal government’s revenue mix is meant to increase. In order tomake US products more competitive internationally, measures to weaken the dollar might be on the cards, possibly as part of a so-called “Mar-a-Lago accord”, although such an accord has not yet been officially confirmed.
It is only natural that increasing the share of the industrial sector in the US economy is associated with adjustment costs and a loss of prosperity for a large part of the population. It goes without saying that production and employment in the industrial sector can only rise if the global economy develops in an orderly fashion. (May 2025)
Correction of AI infrastructure companies
In recent months it has become increasingly apparent that there are ways to train LLMs (large language models), which form the backbone of artificial intelligence (AI) applications, with far fewer resources – especially when it comes to the use of high-end chips – than the current standard. The focus is currently on DeepSeek(DS), a two-year-old start-up from China. Their latest app, which has become available in January, became the most downloaded app in Apples App Store, reminiscent of the time when ChatGPTwas made widely available over two years ago.
While it is unclear what the exact training costs of the DS apps are, it appears that they are many times lower than has previously been the case. Cheaper AI solutions have many advantages. The number of AI applications and demand increase with lower prices, and cheaper products are positive for users, i.e. consumers and companies. DS is not profit-orientated (similar to the initial position of OpenAI, the developer of ChatGPT). The code is open source and can be used freely.
If the prices for AI solutions become significantly cheaper, it is not clear whether the overall pie will grow, though it likely will, similar to the growth in computer sales, despite prices falling in recent decades. At the same time, it is likely that leading technology companies will rethink spending plans for data centres, which means at least a dip in demand (not necessarily immediately but later in the year), especially for AI chip manufacturers (first and foremost Nvidia, but also Broadcom as well as the leading Dutch high-end chip machine manufacturer ASML). Cloud providers (Microsoft, Alphabet and Amazon) are also affected, but probably to a lesser extent, and industrial companies benefiting from AI (e.g. Schneider Electric, Siemens and Amphenol), and even electricity suppliers. Conversely, technology budgets for digitalisation projects outside of AI could increase again. Market action supports this view, with a number of technology stocks of non-AI providers gaining during the AI infrastructure sell-off.
As the segment of AI infrastructure providers is overall not that large, we do not necessarily consider their correction to be negative for the market as a whole. Europe's relative position is improving (AI infrastructure providers have a larger weighting in US indices), although Europe's outperformance is not a foregone conclusion, with US tariffs still looming. (February 2025)