Two fifths of Europeans believe tariffs will drive inflation higher

Some two fifths (40%) of European consumers believe that tariffs resulting from recent trade tensions will drive inflation higher, a new report by the European Central Bank (ECB) has found.

According to the ECB’s Consumer Expectations Survey, around a quarter (24%) of consumers believe tariffs will slow economic growth, while 13% expect them to have a negative impact on their household finances.

Consumers who perceive tariffs as inflationary tend to have adjusted their inflation expectations upwards, the data showed – by around 0.2 percentage points for the year ahead, 0.13 percentage points for three years ahead and 0.06 percentage points for five years ahead.

‘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,’ the ECB noted.

Growth expectations

In addition, 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.

Tariffs are also affecting the spending habits of consumers, with just over a quarter saying that they have ‘switched away’ from US products, in response to the tariffs. Some 16%, meanwhile, state that they have reduced their overall spending.

‘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,’ the ECB added.

Financial literacy

Financial literacy also plays a role in terms of how tariffs are influencing consumer behaviour – consumers with higher financial literacy are more likely to switch away from products made in the United States, while those with lower literacy are more likely to report reducing their overall consumption.

‘The reduction in spending is driven by cuts in discretionary expenditure,’ the ECB said. ‘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.’ Read more here.