With odds of a Trump win rising, here's what it could mean for Europe's economy

With markets in recent weeks cranking up their bets that Donald Trump will win the presidential election, Goldman Sachs economists say that another term for the former U.S. leader could have "profound implications" for the euro area's economy.

"Our baseline estimates point to a sizeable GDP [gross domestic product] hit of around 1% with a modest 0.1pp [percentage point] lift to inflation," Goldman Sachs' Jari Stehn and James Moberly said in a note published Friday before the Saturday assassination attempt.

"Trump's re-election would thus pose a significant downside risk to our otherwise constructive growth forecast for the Euro area."

Trade policy uncertainty, added defense and security pressures, and spillover effects from U.S. domestic policies on, for example, taxes could impact Europe, they explained.

Trump says he was grazed by a bullet Saturday during an attempted assassination at a rally in Pennsylvania. The shooting left one attendee and the gunman dead, and two more attendees still in critical but stable condition.

Some analysts have suggested the events could boost Trump's chances of taking back the White House in the U.S. election later this year, and certain assets have already rallied Monday with markets pricing in that possibility.

Even before Saturday, the likelihood of a second Trump presidency had risen following a poor performance from President Joe Biden in a presidential debate a few weeks ago. Goldman Sachs said in its note Friday that betting markets were assigning a probability of around 60% for a Trump win in November, with some reports over the weekend that this figure had risen again.

Trump's trade policy, and the uncertainty around it, could be one factor that impacts Europe's economy, just as it did