The Netherlands - Revised growth forecasts in response to the US tariffs

International developments have been unfolding rapidly recently, and as a result we revised our growth forecasts earlier this month. For 2025 it has been adjusted downwards to 1.4% (from 1.8%), as the tariffs are implemented earlier than we originally included in our projections. We raised the forecast for 2026 to 1.3% (from 1.0%) primarily reflecting fiscal support and mitigating factors kicking in. Generally, while there is a lot of uncertainty about the impact of the tariffs, there are several channels through which they impact the Dutch economy. Firstly, there is a direct effect on Dutch exports to the US. While there are still exceptions for important exported goods, such as pharmaceuticals, consumer electronics and semiconductors, the currently active 10% import tariff impacts the Dutch economy on the short term. Secondly, there is the indirect effect, which we judge will dominate: a weakening of the global economy and trade particularly affects the export-dependent Dutch economy.

There are a few mitigating factors. While the frontloading effect has so far been less visible in the macro figures compared to what we had anticipated, some frontloading might still happen in the currently exempted goods. Also, the EU might benefit from a stronger relative competitive position versus the US, as China received a much higher tariff. Additionally, Trump’s announcement has not been the only recently announced game changer for Dutch growth forecasts. Fiscal largesse in main trading partner Germany has spillovers to the Netherlands, which comes on top of the EU ambition to increase defence spending. Timing plays a critical role in the growth profile, as tariffs mainly hit the economy in 2025, while the growth impulse from fiscal spending will ramp up over the course of 2026.

The growth figure for Q1 – released on the 30th of April – is expected to reach 0.5% q/q, which is mainly driven by spending from both the government and households. The latter benefits from increasing real incomes and supportive government policies, which boost consumption despite lingering weak household sentiment. Conversely, investment growth is likely to be negative after an exceptionally strong Q4, particularly in transport such as cargo vans, which surged late last year in anticipation of the altered tax regulations in 2025. However, the negative impact of subdued investment is likely counterbalanced by a positive contribution from inventories, rebounding from their drop in Q4.

The Dutch government has concluded discussions on the Spring Memorandum and unveiled its plans. The list of policy wishes was extensive. The new plans include various short-term measures to bolster household purchasing power, such as reducing the energy tax, freezing social rents, and increasing rental allowances. Additionally, EUR 1.1 bn per year has been allocated to defence (adding just 0.1% of GDP). To offset these spending increases, amongst others, the income tax will see only limited inflation adjustments and the duration of unemployment benefits has been reduced. The Spring Memorandum appears to lack structural investments. Decisions on critical and more structural issues, such as nitrogen and climate goals, which seriously constrain the Dutch economy, have been postponed until Prinsjesdag. Nevertheless, with these new plans, the coalition has managed to comply with Dutch budget rules and guidelines.