Sweden Grapples with Economic Fallout from U.S. Trade Tariffs
Synopsis: Sweden’s economy is reeling from the uncertainty and market volatility caused by U.S. President Donald Trump’s trade tariffs. With exports forming a significant part of its GDP, the country faces declining growth forecasts, shaken household confidence, and cautious business investment, as the threat of escalating tariffs looms large.
Tariffs Hit Swedish Households and Markets
Sweden is feeling the economic strain from U.S. trade tariffs, even before their full impact takes hold. Finance Minister Elisabeth Svantesson recently highlighted the toll on Swedish households, noting that eight out of 10 Swedes invest in financial markets, which have been rocked by volatility due to tariff uncertainty. This market turbulence has directly affected household savings, a cornerstone of Sweden’s economy, where citizens collectively hold 268 billion Swedish kronor ($27.8 billion) in liquid financial assets, including 138 billion kronor in investment funds.
Sweden’s Economy Faces Downturn
The broader Swedish economy is showing signs of distress. Government data revealed a 0.2% contraction in the first quarter of 2025, and the finance ministry has lowered its growth forecasts to 1.8% for 2025 and 2.3% for 2026, citing U.S. tariff policies as a key factor. The Riksbank, Sweden’s central bank, warned of significant market movements driven by shifts in U.S. trade and security policies, adding to the economic uncertainty. Svantesson emphasized that the unpredictability of tariffs is causing companies to delay investments, further hampering growth.
Household Confidence Takes a Hit
Sweden’s strong culture of saving, particularly in investment funds, makes its households especially vulnerable to market swings. The Swedish Investment Fund Association notes that nearly all Swedes are fund savers when including mandatory pension contributions, with total fund assets reaching 7.75 trillion Swedish kronor by March 2025. However, recent data shows savers shifting away from U.S. funds toward European and Swedish ones, reflecting growing unease about U.S. trade policies. JPMorgan’s Scandinavia chief economist, Morten Lund, pointed out that household confidence has plummeted since the U.S. election, potentially curbing consumption and further weakening economic performance.
Export-Dependent Economy at Risk
With exports accounting for 55% of Sweden’s GDP in 2024, the country is highly exposed to U.S. tariff policies. Major exports to the U.S., including autos, machinery, pharmaceuticals, and steel—now subject to a 50% tariff—are critical to the economy. While most Swedish exports go to Nordic and European countries, the U.S. is its third-largest single market. Trump’s tariffs, initially set at 20% on the EU and later reduced to 10% for a 90-day negotiation period, have created uncertainty, with the threat of a 50% duty looming if talks fail by July 9.
Uncertainty Stifles Business and Growth
The unpredictability of U.S. trade policy is a major concern for Swedish businesses. Companies are holding back on investments, unsure whether tariffs will remain at 10%, revert to 20%, or escalate further. This hesitation is dampening economic activity and contributing to Sweden’s revised lower growth projections. Svantesson expressed frustration at the lack of clarity, noting that the absence of a clear trade policy is hurting the economy more than the tariffs themselves.
A High-Stakes Trade Game
Trump’s tariffs, driven by his view of unfair EU trading practices and U.S. trade deficits, have put Sweden and other EU nations in a difficult position. Ongoing negotiations between the EU and U.S. aim to avoid further escalation, but progress has been slow. Svantesson described the situation as a “game with no winners,” emphasizing the real costs to households and the broader economy. As Sweden braces for potential further economic challenges, the fallout from U.S. trade policies continues to cast a shadow over its financial stability and growth prospects.
