Tariffs accepted by the EU as part of the trade deal agreed with the US could potentially cause eurozone inflation to rise again, according to Baker Tilly Ireland.

The rate of inflation was close to the European Central Bank's (ECB) two per cent target last month, unchanged from June.

July marked the sixth successive month that prices have increased by less than 2.3 per cent year-on-year, while the UK inflation (currently 3.6 per cent) has not been as low since October 2024.

The strong euro, which is up ten per cent against the US dollar this year to date, has made imports cheaper and declining energy prices have dampened inflationary pressures.

Over the past year, the ECB has been able to reduce interest rates from four per cent to two per cent, but economic growth has not followed. Eurozone GDP rose just 0.1 per cent in Q2.

The 15 per cent tariff on European goods entering the US augurs a darker outlook for the eurozone economy, Baker Tilly economic advisor Joe Nellis said.

Although the 30 per cent tariff threatened by US President Donald Trump was avoided, Nellis said the deal will lead to an increase in prices in Europe.

"German Chancellor Friedrich Merz has already expressed his fear that we will see a spike in inflation. The ECB will certainly wait and see before cutting interest rates again," he continued.

"The ECB has played its hand well so far. It has calmed inflation and at the same time lowered interest rates to give the economy the best chance of growth.

"But things have changed — shockwaves to the foundations of our global economic system may be about to undo its good work when victory appeared so close."

Photo: Ursula von der Leyen and Donald Trump. (Pic: Andrew Harnik/Getty Images)