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The Week Ahead - 9 - 13 June 2025
These are the Key Macro Events for the upcoming week.
Sovereignty increases EU regulatory burden
Trade between European member states is less intensive than trade between the 50 American states. Consequently, the benefits of scale and specialization remain underutilized, resulting in lower productivity growth compared to the US. One reason for the disparity in trade intensity is the complex regulations that hinder the internal market. The complexity of European regulations is not primarily due to the inferiority of individual member states' regulations compared to those in the US, but rather the lack of harmonization among the member states. Simplifying rules, as the European Commission currently aims to do, does not necessarily resolve this issue. A truly unified, common market with low transaction costs becomes feasible when member states can no longer easily negotiate exemptions or establish additional rules. Therefore, member states will need to relinquish some sovereignty. Furthermore, new regulations should be consistently evaluated for effectiveness (do the rules achieve the intended outcomes?), efficiency (are these outcomes achieved at the lowest possible cost?), consistency (do the rules align with policies in other areas?), and enforceability (can compliance be effectively monitored?). This evaluation task was previously assigned to the European Commission. However, as the Commission's role has become more political, and compromises are often required to strike deals, it is less able to perform this task effectively. Consequently, this responsibility should be assigned to an independent body.
ECB likely has more to do, despite hints it is nearing the end
The ECB’s Governing Council decided to cut its policy rates by 25bp, taking the key deposit rate to 2%. The move was widely expected by analysts and priced in by financial markets. The comments in the press conference suggested that the Council considers it is nearing the end of its rate cut cycle. However, we think that further interest rate cuts are still likely. Indeed, we maintain the view that the ECB will cut policy rates further, with the deposit rate reaching 1.5% by September. The ECB’s more hawkish tone does raise the possibility that the rate reductions may take longer than that to materialise, with a pause possible at the next meeting.
What does the new 50% steel & aluminium tariff mean for Europe?
Today, the US is doubling its import tariff on steel and aluminium from 25% to 50%. Announcing this at a steel mill in Pennsylvania last Friday, President Trump indicated he wanted to make tariffs so high that US businesses would have no alternative but to buy from American suppliers. To quote the president, “[If] It's at 25% - they can get over that fence. At 50%, they can no longer get over the fence." The UK has a partial carve-out thanks to its trade deal with the US, and faces a lower 25% tariff. But the EU – still in negotiations with the US – faces the higher 50% tariff.
Dutch Macro Perspectives - Wilders blows up coalition amid elevated uncertainty
Dutch government falls as the far-right PVV quits the coalition. The current government assumes caretaker status, meaning they only govern on selected topics. While uncertain at this stage, new elections are likely to be held, possibly in October.
Eurozone inflation fall intensifies
Eurozone HICP flash inflation took a renewed leg lower in May, with headline inflation falling to 1.9% from 2.2% in April, and core inflation falling to 2.3% from 2.7%. Within that, services inflation fell sharply to a three year low of 3.2%, down from 4% in April.
China - May PMIs reminder of high tariffs
Trade war escalation still visible in Caixin’s manufacturing PMI.… a reminder of much higher US import tariffs despite Geneva-truce. Official composite PMI picks up slightly.
Dutch industry struggles with declining orders and cuts staff
The Nevi Dutch Manufacturing PMI fell further in May, from 49.2 to 49.0. Despite the uncertainty surrounding trade policy and a further decline in the number of new orders, the Dutch manufacturing industry increased production for the third month in a row, albeit slightly.
The Week Ahead - 2 - 6 June 2025
These are the Key Macro Events for the upcoming week.
China - Geneva truce softens export shock, but uncertainty remains
April data show impact of trade war escalation last month, before Geneva truce. (Temporary) reduction of tariffs softens key drag, although uncertainty remains high. We raise our annual growth forecasts for 2025/ 2026 to 4.7% (from 4.1%) and 4.2% (from 3.9%).