Recent trade tensions and tariff announcements are significantly affecting the behaviour and expectations of European consumers. ECB Consumer Expectations Survey (CES) data collected in June 2025 reveal that European consumers expect tariffs to adversely affect inflation, household finances and economic growth.[1] A net balance of 40% of respondents view the tariffs as inflationary, a net balance of 13% see them as having a negative impact on their finances, and a net balance of 24% believe the tariffs will dampen economic growth (Chart A).
Chart A
Household expectations regarding the impact of higher tariffs
(weighted net percentages)
Source: ECB (June 2025 CES).
Notes: Population-weighted data. Question wording: “Since entering office in January, the US President has announced the potential imposition of tariffs, and in response several countries (including the European Union) have announced retaliatory measures. Assuming such tariffs are in place, how do you think they will affect (if at all) each of the following over the next 12 months?”. Mean weighted net percentages calculated by weighting responses as follows: “Increase a lot” (+1), “Increase a little” (+0.5), “Decrease a little” (-0.5), “Decrease a lot" (-1).
Consumers who view tariffs as inflationary have adjusted their inflation expectations upward. The data show that, for the group that considered tariffs inflationary in the June 2025 survey, inflationary expectations also increased compared to January 2025, by around 0.2 percentage points for the one year ahead, 0.13 percentage points for the three years ahead and 0.06 percentage points for the five years ahead horizon (Chart B, panel a). The small increase in long-term inflation expectations among respondents who view tariffs as inflationary suggest that the perceived impact of tariffs on inflation may not be wholly transitory.
Chart B
Changes in expectations due to tariffs
a) Inflation expectations
(left-hand scale: percentage points; right-hand scale: percentages)
b) Economic growth expectations
(left-hand scale: percentage points; right-hand scale: percentages)
Source: ECB (June 2025 CES).
Notes: Population-weighted data. Panel a) shows the difference between inflation expectations in January 2025 and the average of inflation expectations in April, May and June 2025 for respondents who believe tariffs will increase inflation and for those who do not for three horizons: one year ahead, three years ahead and five years ahead. Panel b) shows the difference between economic growth expectations in January 2025 and the average of economic growth expectations in April, May and June 2025 for respondents who believe tariffs will dampen economic growth and for those who do not.
Similarly, concerns about economic growth have increased among those who see tariffs as recessionary. Consumers who perceive tariffs as recessionary have reduced their expectations for economic growth over the next 12 months by 0.4 percentage points since January 2025, compared to a decrease of only 0.2 percentage points among other respondents (Chart B, panel b). These findings echo the message of Chart A, that trade tensions are driving a more pessimistic economic outlook among households.
In response to tariff-related concerns, consumers are altering their spending habits in notable ways. Approximately 26% of respondents reported switching away from US products, while around 16% indicated that they have reduced their overall spending (Chart C, panel a).[2] These behavioural shifts vary across income groups: high-income households are more likely to switch away from US goods, while lower-income households are more inclined to cut back their overall spending.
Chart C
Actions taken by CES respondents after the tariff announcements
a) Actions taken, by level of income
(percentages of respondents)
b) Actions taken, by degree of financial literacy
(percentages of respondents)
Source: ECB (June 2025 CES).
Notes: Population-weighted data. Percentages of respondents who took a specific action after the announcement of potential tariffs. In panel a), income quantiles are derived from reported household income by wave and country. In panel b), financial literacy is based on scores achieved in a CES financial “quiz” on a scale of 0 to 4, where 4 is high and less than 3 is low financial literacy.
Financial literacy and preferences for switching away appear to play a role in shaping these actions. As highlighted in Baumann et al. (2025b), many consumers were already willing to switch away from US products prior to the tariff announcements of the US Administration in April 2025.[3] In the June 2025 survey, consumers with higher financial literacy were more likely to report switching away from US products, while those with lower financial literacy were more likely to report reducing their overall consumption (Chart C, panel b).
The reduction in spending is driven by cuts in discretionary expenditure. Consumers who reported adjusting their consumption following tariff announcements reduced their overall nominal spending more than the comparison group, as estimated by the difference between the two groups and their consumption in January and April 2025. As expected, this reduction was driven entirely by discretionary spending, while spending on necessities remained largely unaffected (Chart D).
Chart D
Difference-in-difference estimates of consumption reduction in response to trade tensions
(EUR)
Source: ECB (June 2025 CES).
Notes: Population-weighted data. Difference in the change in level of consumption between January 2025 and April 2025 for those who reported that they had reduced spending after the tariff announcements and those who did not. Necessities include food, beverages, housing costs and utilities, while all other consumption is discretionary. Yellow lines represent 90% confidence intervals.
These findings highlight the tangible effects of trade tensions on the behaviour and economic expectations of European consumers. By altering inflation and growth expectations and prompting shifts in spending behaviour, tariffs have introduced a layer of uncertainty that is influencing both the decisions of individual households and, possibly, broader economic developments.
References
Baumann, A., Caprari, L., Dossche, M., Kocharkov, G. and Kouvavas, O. (2025a), “Consumer confidence and household consumption decisions”, Economic Bulletin, Issue 5, ECB.
Baumann, A., Caprari, L., Dossche, M., Kocharkov, G. and Kouvavas, O. (2025b), “How European consumers respond to US tariffs”, VoxEU Column, Centre for Economic Policy Research, 16 July.
See Baumann et al. (2025a) for a detailed analysis of recent developments in consumer confidence and the corresponding muted growth in consumption.
The reported switch away from US products has occurred despite the significant depreciation of the US dollar.
Looking at those respondents who in March 2025 reported preferences as the main reason for potential substitution, responses in the June 2025 survey indicate that roughly 40% have now acted on those intentions.