Eurozone: Positive spillover from Trump’s presidency in the short run - BNPP

For the Eurozone, analysts at BNP Paribas see a positive spillover in the short run, although the impact of a Trump Presidency on Europe depends on the time horizon.

Key Quotes

“In the near term, Mr Trump’s plan to deliver fiscal stimulus is likely to boost US growth, with some spillover to the Eurozone. Certainly, financial markets have chosen to focus on this positive dynamic. ECB estimates suggest that a positive 1% shock to US domestic demand adds around 0.2-0.3pp to Eurozone growth.”

“However, the direct trade impact is less than 0.1pp, meaning much depends on the echo impact from Eurozone exports to third countries that may also benefit from stronger US growth and, of course, more general confidence effects. Global growth and Eurozone confidence indicators have picked up recently, possibly in anticipation of stronger near-term US conditions.”