Impact of Trump tariffs on Luxembourg economy ‘hard to predict’

The potential damage caused by the tariffs imposed by US President Donald Trump on Luxembourg’s economy are “difficult to predict”, Luxembourg’s finance, economy and foreign affairs ministers said on Tuesday.

460 Luxembourgish companies exported at least one product directly to the US in 2024, including 41 in the category of transport materials – a sector that has been slapped with heavy tariffs, although the White House announced on Monday the automotive tariffs would be scaled back or delayed.

One hundred days into the second Trump presidency, the frequent changes to the US tariff regime, coupled with the fact that some companies export parts used in the automotive industry that are not classified as transport materials, mean Luxembourg’s economy will be impacted.

However, Gilles Roth, Lex Delles and Xavier Bettel in a reply to a parliamentary question by lawmaker Sven Clement stressed that Luxembourg is unlikely to fall into a recession as markets adapt and new economic links are forged as old ones change

A forecast by ING economy expert Ruben Dewitte, which Clement cites, said “the direct and more indirect impact on the Luxembourg economy could, despite a limited direct exposure of only 0.13% of GDP, reach up to 0.98% of GDP.”

The ministers said “the actual impact on Luxembourg’s GDP would therefore be lower,” as “the estimate of 0.98% mentioned in the article does not correspond to the impact of the increase in US tariffs on Luxembourg’s GDP.”

The worst case scenario would compound a knock-on effect of pressure on the wider EU. Luxembourg’s statistics agency Statec is currently working on an assessment of the possible impacts on the Luxembourg economy and their extent, although evaluating many elements and aspects remains challenging.

On top of exchange rate developments, the announced tariff increases, if implemented on the long-term are “historically exceptionally high”, meaning existing statistical evaluation models are not suited to estimate the impact, the ministers said.

“In addition, much uncertainty remains about the actual decisions of the US government, and thus also about possible countermeasures by the EU and other countries. This climate of uncertainty is generally difficult from an economic perspective—for investments, consumer behaviour—and also hard to predict,” the ministers added.

Additional reporting by Tracy Heindrichs.