The European Commission has significantly lowered its growth forecasts for the eurozone, citing the damaging effects of US tariff policies as a key factor. The bloc’s economy is now expected to expand by just 0.9 per cent this year, down from the previous estimate of 1.3 per cent, with only a modest recovery to 1.4 per cent projected for 2026.
The broader EU is anticipated to grow by 1.1 per cent in 2025, rising slightly to 1.5 per cent next year. These downward revisions reflect growing concerns over the impact of trade restrictions, particularly those imposed by the United States, on Europe’s export-driven economies.
The Commission highlighted President Donald Trump’s proposed 20 per cent tariff on EU goods as a major source of economic uncertainty, comparing its disruptive potential to the worst phases of the COVID-19 pandemic. While European officials hope to negotiate the rate down to 10 per cent, the outcome remains uncertain, leaving businesses bracing for higher costs and reduced competitiveness. The tariffs have already begun to weigh on trade, with EU exports expected to grow by a meager 0.7 per cent this year. Germany, Europe’s largest economy and a global export leader, is forecast to stagnate with zero growth in 2025, while France and Spain are also facing slower expansions as global trade weakens.
The report warns that further escalation in trade tensions could deepen the economic damage, leading to additional declines in exports, renewed inflationary pressures from pricier imports, and delayed business investment due to uncertainty. However, the Commission also noted that a faster-than-expected de-escalation of tariffs could improve the outlook.
For now, Europe remains vulnerable to the shifting landscape of global trade policy, with protectionist measures threatening to undermine its fragile recovery. The coming months will be critical in determining whether negotiations can ease the strain, or if the EU must prepare for even tougher economic headwinds.
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