As the Eurosystem normalises its balance sheet, central bank reserves – banks’ most liquid asset – keep declining. This post examines how banks adapt to lower levels of reserves and explains why take-up in the Eurosystem’s standard refinancing operations (SROs) is expected to increase.[1]
 
Central bank reserves have almost halved from a peak of €4.9 trillion in 2022 to €2.6 trillion in early 2026 (Chart 1a). While still abundant, they are unevenly spread across banks. This implies that, as the Eurosystem continues to shrink its balance sheet, some banks may need to source reserves sooner than others. At the same time, money market rates at which banks lend and borrow have moved closer to the deposit facility rate (DFR) – the main policy rate through which the ECB steers its monetary policy stance. In fact, secured money market – repo – rates last traded this close to the DFR in 2020. This blog post examines the implications of these trends.
In an annual Eurosystem survey, bank treasurers were asked about the preferred level of reserves they wish to hold. When compared to actual reserve holdings, we find that banks representing 26% of all euro area banking assets now operate close to what was indicated as their preferred level of reserves, up from 15% a year earlier (Chart 1b).[2] The group includes large banks, such as globally systemically important banks (G-SIBs), as well as custodians and asset managers – institutions that generally manage their liquidity more actively.
Looking ahead, reserves are projected to decline by about €470 billion per year, though this projection is subject to high uncertainty (Chart 1a).[3] While at present most banks are still holding abundant reserves, the share of banks nearing their preferred reserve levels is expected to increase. By the end of 2026, banks accounting for 50% of total banking assets are projected to reach their preferred level (Chart 1b). In other words, banks will have to more actively manage their liquidity.

Chart 1
Reserve positions of euro area banks

a) Projected path of reserves

b) Share of banks close to their preferred reserve level

(EUR billions)

(percentage of banking assets)

Sources: ECB (Eurosystem market operations data and the Eurosystem Bank Treasurer Survey for the fourth quarter of 2025).
Notes: The left panel shows the projected path of euro reserves assuming take-up in standard refinancing operations is in line with the median SMA respondent. The uncertainty area around the projections is based on a range of alternative assumptions. The right panel classifies banks by the relative distance between their reserves in fourth quarter of the relevant year and their preferred reserve level indicated in Bank Treasurer Survey. Banks are classified as close to their preferred level if their reserve holdings are within a distance equivalent to 1% of total assets of the reserve target they indicated in the Eurosystem Bank Treasurer Survey. All other banks are classified as banks with abundant reserves. The projection for the fourth quarter of 2026 assumes that the aggregate decline in reserves will continue at the same pace as that observed for each bank business model group between the fourth quarter of 2024 and the fourth quarter of 2025.

As reserves decline, banks will increasingly rely on money markets and the Eurosystem refinancing operations to manage their reserve levels. Those banks that are closer to their preferred reserve levels or their internal regulatory targets will normally be the first to seek liquidity. We are analysing banks’ behaviour in money markets and central bank operations in order to learn how reserves are distributed through the market. We are also investigating how money market rates are evolving and how banks are adapting to the changes to the operational framework for implementing monetary policy announced in March 2024.
Liquidity is being redistributed smoothly
Commercial banks are actively lending and borrowing in money markets, which is redistributing their central bank reserves smoothly across banks and euro area countries. Currently this redistribution is working well – there are no signs of fragmentation. The repo market – the main money market to borrow and lend reserves – is dominated by banks with abundant reserves.[4] These are mainly dealer banks that intermediate liquidity. However, other banks are also becoming increasingly active in the repo market in order to manage their reserve levels (Chart 2). In fact, those closest to their preferred reserve levels borrow the most in the short-term repo market relative to their reserves.

Chart 2
Outstanding gross and net repo borrowing of banks

Sources: ECB (Securities Financing Transactions Data and the Eurosystem Bank Treasurer Survey) and ECB calculations.
Notes: The chart shows the average gross and net outstanding repo positions in 2025 by bank liquidity group. “Term repo” is defined as transactions by euro area banks against any collateral type with a maturity above one month. The bank liquidity groups are banks with reserves close to target (i.e. close to their preferred level); and banks with abundant reserves. For banks with abundant reserves we distinguish between those that are close to either their internal liquidity coverage ratio (LCR) or net stable funding ratio (NSFR) targets. Banks are considered to have optimised their LCR or NSFR if they are within 11 percentage points of their internal LCR target or 5.3 percentage points of their internal NSFR target. These ranges represent the 25th percentile of LCR standard deviations and the 50th percentile of NSFR standard deviations.

Banks are also active in term money markets – a market where they borrow and lend for longer than 30 calendar days. They use this market to manage their compliance with Basel III regulatory standards: the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR). Survey evidence indicates that banks set internal targets above the 100% regulatory minimum for these regulatory ratios and are keen to defend them. When facing liquidity shortfalls, term money markets are typically the first point of access. This market activity has further redistributed reserves across euro area banks and countries, but it has also pushed up premia on term liquidity, as banks close to their regulatory targets increasingly borrow in these markets to fine-tune these ratios. In turn, activity and interest rates in the term segment can act as an early indicator of changing system-wide liquidity needs and as a benchmark for how attractive Eurosystem standard refinancing operations are. Figure 1 illustrates these interactions.

Figure 1
Illustration of the interaction of reserves with regulatory ratios, markets and the central bank

Source: ECB.

Short-term interest rates are close to the deposit facility rate
Overall, short-term market interest rates remain near the ECB’s DFR (Chart 3a). The benchmark rate for unsecured bank borrowing is the euro short-term rate (€STR). Its spread versus the DFR has gradually narrowed. Likewise, secured money market (repo) rates have moved closer to the DFR as collateral has become more abundant and reserves have continued to decline.

Chart 3
Short-term interest rates steered by the deposit facility rate

a) Spread between short-term rates and the DFR

b) Spread between repo rates and the DFR by borrower type

Sources: ECB data (Money Market Statistical Reporting and the Securities Financing Transactions Data) and ECB calculations.
Notes: The left panel shows the spread between the €STR and the DFR as well as the spread between the repo rate and the DFR, 5-day moving average excluding month-ends, where the repo rate is the weighted-average repo rate for one-day trades collateralised by euro area government bonds or other EU bonds. The repo rate is trimmed at the 25th and 75th percentiles. The right panel shows the transaction volume-weighted average repo rate for: borrowing banks that are close to their preferred reserve level; borrowing banks that have abundant reserves (see Chart 1b); and borrowing by hedge funds. The latest observation is for 30 March 2026.

The share of overnight repo trades above the DFR has increased to 40%, but this does not reflect funding pressures for banks. In fact, banks – including those with less abundant reserves – are still borrowing at rates just below the DFR on average (Chart 3b). Instead, repo rates above the DFR mainly reflect cash demand from hedge funds which are willing to pay the spread to fund their investment strategies in other market segments.
Lessons learned from other jurisdictions, i.e. the United States and the United Kingdom, underscore two points. First, money market rates can also be driven by other factors, such as higher collateral supply or higher non-bank demand for cash. And, second, it is not only banks’ reserve needs which can substantially influence money market rates.[5] So rising rates do not necessarily signal increasing scarcity of reserves, but may instead reflect shifts in market structure or funding conditions. In such cases, movements in certain segments of the money markets need to be interpreted with caution, as they may not provide a reliable signal about the overall liquidity environment.
Declining reserves to eventually lift take-up in ECB operations
The demand for Eurosystem SROs remains low so far, because conditions in money markets continue to be favourable. On average, money market rates are largely below the rate on the main refinancing operation (MRO), currently 2.15%, which is 15 basis points above the DFR, now at 2.0% (Chart 4a). Banks can borrow at lower rates in markets than they would have to pay to borrow from the central bank against a broad set of collateral. As a result, the take-up in the ECB’s SROs has remained limited, averaging around €20 billion last year (Chart 4b). In contrast, longer-term market funding (for instance, with tenors of 12 months) is seeing rates above the MRO rate. This reflects its regulatory value, especially for the NSFR, as SRO funding does not count towards this ratio. However, while overall SRO take-up is low, more banks are participating with test bids or for covering temporary liquidity needs. Simply put, there is little urgency to borrow from the ECB as of now, but banks have to ensure operational readiness.
Our survey results show that banks’ incentive to use Eurosystem operations is likely to increase as reserves become scarcer and SROs become more attractive relative to market funding. This means that moving to lower levels of reserves may, all other things being equal, be accompanied by a rise in money market rates.
In the ECB’s operational framework, the SROs are designed to serve as the marginal tool for meeting banks’ liquidity needs. As reserves become less abundant and more banks will approach their preferred levels of reserves, SROs – provided at fixed rates with full allotment – offer a key source of reserves. Also, when money market rates are moving higher, borrowing through SROs and lending into the money market becomes more attractive. In turn, more take-up in SROs will inject reserves into the system, keeping money market rates in check.

Chart 4
Favourable funding conditions in money markets explain low take-up in Eurosystem operations

a) Relative market pricing of borrowing in money markets versus the expected deposit facility rate

b) Use of Eurosystem SROs

Sources: ECB (Money Market Statistical Reporting, Securities Financing Transactions Data, Short-Term European Paper statistics, Survey of Monetary Analysts) and ECB calculations.
Notes: The left panel shows the average difference between each money market rate and the expected DFR implied by the overnight interest swap (OIS) rate with a matching maturity, as an average from July 2025 until 30 March 2026. Repo against high-quality liquid assets (HQLA) collateral – such as euro area government bonds (EGB) – tends not to provide any LCR or NSFR regulatory value irrespective of the trade maturity. The right panel shows the outstanding amount in SROs and the median consensus from the March 2026 Survey of Monetary Analysts. LTRO stands for 3-months longer-term refinancing operation, MRO for main refinancing operation.

Conclusion
More banks are now operating closer to their preferred reserve levels and the euro area financial system has so far adjusted well to declining reserves. Banks are borrowing and lending in the markets effectively, which is helping redistribute reserves smoothly across banks and countries. There are no signs of fragmentation. Short-term interest rates, both secured and unsecured, remain close to the ECB’s DFR. Until now, money market funding conditions have been favourable compared with the terms for borrowing through the SROs. Therefore, banks have met almost all their liquidity needs through the money markets. However, as reserves continue to decline it will be important for banks to be ready to use Eurosystem operations as routine tools to manage their liquidity and to support market-making.
The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.

Standard refinancing operations consist of the main refinancing operations (MROs), with a duration of one week, and also the longer-term refinancing operations (LTROs), which have a duration of three months. Both operations provide liquidity upon demand against broad collateral, at the MRO rate and the average MRO rate respectively.

The Eurosystem Bank Treasurer Survey was conducted between 14 and 29 October 2025 with two main objectives: to determine the preferred minimum level of reserves banks aim to maintain under the current economic and financial conditions and to assess the demand for Eurosystem refinancing operations. The survey also investigates what drives demand for central bank reserves and how regulatory requirements interact with that demand.

The path of reserves is calculated based on a projection of the other balance sheet items of the Eurosystem. Banknote growth and non-monetary policy holdings are the main contributors to the uncertainty around the central projection.

Repo refers to repurchase transactions, a type of short-term loan where one party sells a financial asset with a simultaneous commitment to repurchase that asset at a future date. The repo market is therefore also called the secured money market, as borrowing of liquidity (reserves) is secured by collateral (typically government bonds) which the cash lender keeps as insurance should the borrower not repay the loan. Before the global financial crisis, reserves were mainly redistributed via unsecured borrowing and bank lending.

For example, in the United States the Federal Reserve announced the launch of Reserve Management Purchases to stabilise the level of reserves, while in the United Kingdom banks are increasingly borrowing from the Bank of England’s operations, even though reserves remain above the preferred minimum range of reserves. In these jurisdictions, repo rates have experienced upward pressure and mild volatility, which is partly related to demand from non-banks, including hedge funds, and partly to bond supply.

 
 
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What is the Commission proposing to change in the EU ETS Market Stability Reserve?

The Commission is proposing to stop the automatic invalidation of ETS allowances held in the Market Stability Reserve (MSR) above 400 million. Instead of being cancelled, these allowances will be retained in the reserve.
This strengthens the MSR’s role as a buffer, improving its ability to respond to future market developments, including situations of supply tightness or excessive price volatility, while preserving the system’s rules-based design.

Why is the Commission proposing updates to the Market Stability Reserve now?

The EU Emissions Trading System(EU ETS) is delivering: it is reducing emissions, cutting Europe’s dependence on imported fossil fuels and driving investment in clean, homegrown energy. At the same time, as recently highlighted by President von der Leyen at the March European Council, it needs to be modernised to remain effective, flexible and responsive to changing market conditions.
The proposed update to the MSR reflects this need. Stopping the invalidation of allowances will strengthen the system’s capacity to act as a buffer and ensure stability in the years ahead. The comprehensive review of the EU ETS, planned for July 2026, will contain that assessment and include any relevant adjustment to keep the MSR fit for purpose in the next decade.
This measure is part of a broader effort to keep the EU ETS fit for purpose, maintaining its core design while strengthening its ability to deliver decarbonisation, competitiveness and energy security.

How will this change affect carbon prices and the functioning of the EU carbon market?

The Commission does not speculate on carbon price developments or make projections on the price impacts of legislative proposals. The EU ETS remains a market-based system where prices are determined by supply and demand.
The proposed change does not have an immediate impact on the market balance. Under the proposal, allowances in the MSR would only be released into the market at times of market tightness or excessive price increases.
A comprehensive review of the EU ETS will follow in July 2026.

How will the proposal support Europe’s competitiveness while delivering on its climate targets?

Mainly thanks to the ETS, domestic emissions in the EU dropped by 39%, while the economy grew by 71% between 1990 and 2024. The proposal strengthens the EU ETS, so it continues to drive emissions reductions while providing the stability and predictability that industry needs to invest in the transition.
At the same time, strengthening the Market Stability Reserve improves the system’s ability to respond to market imbalances and reduces the risk of excessive price volatility. A more stable and predictable carbon market provides greater certainty for businesses planning long-term investments in clean technologies.
 
 
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The resilience of the global economy is being tested by the evolving conflict in the Middle East, which has generated new inflationary pressures while creating significant uncertainty, according to the OECD’s latest Interim Economic Outlook.
Global growth was steady heading into 2026, supported by the strength of technology-related production, lower effective tariffs on US imports and the momentum carried over from 2025. The energy supply shock following the onset of the conflict in the Middle East is expected to significantly weigh on global growth while putting new upward pressure on inflation.
As a result of these developments, the Outlook projects global growth of 2.9% in 2026 and 3.0% in 2027. The evolution of the conflict in the Middle East is highly uncertain and poses considerable risks to these baseline projections. A more long-lasting disruption, with energy prices remaining elevated beyond mid-2026, would further reduce growth prospects.
GDP growth in the United States is projected at 2.0% in 2026, before moderating to 1.7% in 2027. In the euro area, growth is projected to be 0.8% in 2026 and 1.2% in 2027. China’s growth is projected to slow to 4.4% in 2026 and 4.3% in 2027.
Inflation pressures will persist for a longer period, with inflation now expected to be higher in 2026 than previously projected, reflecting the surge in global energy prices. Headline inflation in G20 countries is projected to be 4.0% in 2026, easing to 2.7% in 2027. Click here to see the projections

“The energy supply shock from the evolving conflict in the Middle East is testing the resilience of the global economy. We project global growth will remain robust, but it will be slower than the pre-conflict trajectory, with significantly higher inflation,” OECD Secretary-General Mathias Cormann said. “Any policy measures adopted to cushion the impact of the energy price shock should be targeted towards those most in need, temporary, and ensure incentives to save energy are preserved. Increasing renewable energy generation and energy efficiency can enhance economic security while boosting resilience to future price shocks.”
The Outlook highlights a range of risks. The expected decline in future energy prices is based on assumptions that current disruptions to supply will ease over time, and be limited in 2027. Longer-lasting closure of oil and gas production facilities in the region or persistent disruptions to exports through the Strait of Hormuz would likely have more significant adverse consequences on energy prices, inflation expectations and future growth.
The Outlook points out that higher energy and fertiliser prices could spur increases in food prices, particularly affecting vulnerable households. Higher energy prices could also increase the cost for European countries carrying out necessary annual replenishing of natural gas stocks. Financial markets may experience additional volatility while rising long-term sovereign yields increase fiscal risks.
Given these challenges, the Outlook highlights key priorities for policymakers. Central banks should remain vigilant and ensure expectations are well-anchored. Stronger efforts are needed to safeguard the sustainability of public finances. Any measures to cushion the economic impact of the energy shock will need to be targeted, temporary and take into account limited fiscal space facing most governments. Lowering trade barriers would boost output and reduce inflationary risks. Over the medium term, improving energy efficiency and reducing dependency on fossil fuel imports can lower exposure to future supply shocks.
For the full report and more information, consult the Interim Economic Outlook online. Media queries should be directed to the OECD Media Office (+33 1 45 24 97 00).
Watch the live webcast of the press conference

Working with over 100 countries, the OECD is a global policy forum that promotes policies to preserve individual liberty and improve the economic and social well-being of people around the world.

 
 
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Understanding the impact of tariffs on inflation is a complex task as it involves analysing responses along the pricing chain, including those by foreign exporters, distributors, producers and retailers. At different stages of this pricing chain, domestic firms could respond to tariff announcements by building up inventories before tariffs are implemented, shifting the sourcing of their imports from countries facing higher tariffs to countries facing lower tariffs (trade diversion) and adjusting the pricing of their products to accommodate the impact of tariffs. This analysis is made all the more intricate by exchange rate developments and exemptions for goods in transit at the time of tariff implementation. In this box, we estimate the impact of recently imposed US tariffs on the prices exporters are charging for products delivered to the United States and explore differences in the pricing behaviour of exporters across countries and sectors observed to date. We show that the costs of tariffs are falling mostly on US firms and consumers and only 5% of costs are borne by foreign firms.
Following a series of tariff increases imposed by the United States, both the prices (net of tariffs) and the volumes of goods it imports have been declining. From January to November 2025, the announced statutory effective tariff rate increased significantly from 3% to over 18%.[1] The annual change in the prices of goods imported into the United States, measured as unit values and reported net of tariffs, has been slightly negative since April. Volumes of imported goods have declined sharply. However, the magnitude of the adjustments in prices and quantities varies across major trading partners, such as China, Canada, Mexico and the EU, which were targeted by higher tariffs. These differences could reflect variations in tariff rates and scope, shifts in the composition of imports and country-specific dynamics.
Exporters to the United States are absorbing only a small fraction of higher tariff-related costs. In aggregate, unit values of imported goods reported net of tariffs show an average pass-through coefficient of 0.95 (Chart A, panel a).[2] This means that a 10% increase in tariffs implies only a 9.5% increase in prices. Therefore, only a small fraction of the increased tariffs is being absorbed by exporters.[3] The pass-through coefficient is significantly lower when looking at specific sectors.[4] However, no significant differences are evident in the estimated tariff pass-through by major trading partners.

Chart A
Impact of tariffs on unit values and volumes of imported goods

a) Unit values of imported goods
(elasticity; complete pass-through = 1)

b) Volumes of imported goods
(elasticity)

Source: ECB staff calculations.
Notes: The reported estimates are based on a panel regression analysis of six-digit product categories of the harmonised system (HS6) import unit values, following the methodology of Amiti et al. (2019). Estimated on a sample from January 2024 to October 2025. The upper part of panel b) reports estimates of the aggregate elasticity (extensive and intensive margin) obtained from a regression where product categories, including those subject to higher tariffs, are no longer imported into the United States. The lower part of panel b) reports estimates obtained from a regression on those product categories which are still traded under tariffs.

The estimated impact of tariffs on import volumes is large. The estimated aggregate elasticity of imports for all product categories stands at -3.7. This means that a 10% increase in tariffs would result in a 37% decline in import volumes. If, by contrast, we focus on only those product categories which are still traded under tariffs, the estimated coefficient declines markedly, albeit remaining economically relevant at ‑0.43. This means that a 10% increase in tariffs would result in a 4.3% decline in import volumes. This difference in estimated elasticity for import volumes suggests that the observed decline is largely associated with products which, in response to tariffs, are no longer traded – meaning they undergo an adjustment through the extensive margin (Chart A, panel b, upper graph). However, volumes also decline markedly for products which are still being traded under tariffs (trade adjustment through the intensive margin; Chart A, panel b, lower graph).
Zooming in on the automotive sector highlights how tariffs triggered significant changes in trade structures, particularly within regional supply chains. In the automotive sector, the results point to a clear decoupling of the United States from China and the EU in favour of Canada and Mexico (Chart B). The surge in car imports from Canada and Mexico reflects a strengthening of existing trade relationships.[5] This stands in sharp contrast to the results reported for the EU and Japan, which saw both a contraction in the unit value of exported cars and a strong decline in the volume of products subject to tariffs and still exported to the United States.[6]

Chart B
Impact of tariffs on unit values and volumes of cars imported to the United States

a) Unit values of imported cars

b) Volumes of imported cars

(elasticity; complete pass-through = 1)

(aggregate elasticity)

Source: ECB staff calculations.
Notes: The reported estimates are based on a panel regression analysis of six-digit product categories of the harmonised system (HS6) import unit values, following the methodology of Amiti et al. (2019). Estimated on a sample from January 2024 to October 2025.

While tariffs are reshaping the geography of trade relations with the United States, their costs are falling mostly on domestic importers and consumers. We find that costs associated with higher tariffs are passed down the pricing chain, with consumers currently bearing around a third of the tariff burden (Chart C). And if the higher tariffs are expected to stay in place for a longer period, the available survey evidence from US firms suggests that they will pass a larger share of tariff-related costs on to consumers. Over the longer term, this share could rise to over half as US firms exhaust their ability to absorb costs. Additionally, if the extent to which exporters absorb tariffs remains limited in scope, as reported above, this implies that US firms would absorb around 40% of higher tariff costs in the longer term.

Chart C
Distribution of tariff-implied costs along the pricing chain

(coefficient estimates)

Source: ECB staff calculations.
Notes: The chart shows how tariff costs are distributed across the pricing chain, based on empirical analyses using data available up to August 2025 (dark blue). The grey bars represent residual attributions, with hashed sections indicating survey results from Andrade et al. (2025), which suggest that the tariff pass-through to consumers increases to 0.55 when in place over longer time horizons. The figure for consumers is derived from a panel regression of tariffs on personal consumption expenditures PCE components, while the figure for exporters is based on a panel regression analysis of six-digit product categories of the harmonised system (HS6) import unit values, following the methodology of Amiti et al. (2019). “Firms” refers to distributors, producers and retailers.

References
Amiti, M., Redding, S.J. and Weinstein, D.E. (2019), “The Impact of the 2018 Tariffs on Prices and Welfare”, Journal of Economic Perspectives, Vol. 33, No 4, pp. 187-210.
Amiti, M., Flanagan, C., Heise, S. and Weinstein, D.E. (2026), “Who Is Paying for the 2025 U.S. Tariffs?”, Liberty Street Economics, Federal Reserve Bank of New York, 12 February.
Andrade, P., Dietrich, A.M., Leer, J., Lin, X., Schoenle, R.S., Tang, J. and Zakrajšek, E. (2025), “Who Will Pay for Tariffs? Businesses’ Expectations about Costs and Prices”, Current Policy Perspectives, No 25-13, Federal Reserve Bank of Boston, 29 September.
Hinz, J., Lohmann, A., Mahlkow, H. and Vorwig, A. (2026), “America’s Own Goal: Who Pays the Tariffs?”, Kiel Policy Brief, No 201, Kiel Institute for the World Economy.
Le Roux, J. and Spital, T. (2026), “Global trade redirection: tracking the role of trade diversion from US tariffs in Chinese export developments”, Economic Bulletin, Issue 1, ECB.

There is a difference between statutory and actual effective tariff rates. The statutory effective tariff rate is calculated based on tariff announcements and a usually fixed trade structure, whereas the actual tariff rate is derived from customs data and is typically lower. The World Trade Organization reports in its tariff tracker that the statutory effective tariff rate on goods for the United States was 18.2% in November 2025, whereas the actual effective tariff rate on goods for the same month was 9.8%. For economic analysis, the statutory effective tariff rate is typically used as the explanatory variable as the implementation date is judged to be more relevant compared with customs reports data, which often suffer from reporting lags and endogeneity bias caused by changing trade volumes triggered by tariffs.

Aggregate effects are captured through time fixed effects, while product-level characteristics are controlled for by including item fixed effects following Amiti et al. (2019). The tariff effect is identified by the common movement of the dependent price variable in response to tariff changes within all items across time.

This finding is broadly consistent with the evidence from the 2018-19 period as documented in Amiti et al. (2019). It is also in line with the available estimates for the current tariffs (Hinz et al., 2026), suggesting that the United States possesses limited terms-of-trade leverage over its global suppliers in the short term. While Amiti et al. (2026) report a similar tariff pass-through (elasticity) of 0.94 for the period from January to August 2025, they find it declined to 0.86 in November.

Steel and aluminium, cars and car parts were targeted early on by the US Administration and faced significant tariffs ranging from 25% to 50%, with few exemptions.

Rerouting of Chinese car exports via these countries may have contributed to these developments, although recent analyses suggest that Chinese exports may have been rerouted through countries in the Association of Southeast Asian Nations. For further details, see Le Roux and Spital (2026).

The estimated elasticity on the trade volume at the intensive margin is 0.84 for Canada and Mexico and ‑1.26 for the EU.

 
 
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