Sign in Subscribe
Tariffs

European Commission Cuts Eurozone Growth Forecasts Amid US Trade Policy Uncertainty

Strategic Insights

— 2 min read

The European Commission has slashed its growth forecasts for the Eurozone due to the economic disruption caused by US trade policy. The commission now expects the Eurozone economy to grow 0.9 per cent this year, down from a previous estimate of 1.3 per cent in November. The revised forecast also includes a lower GDP growth outlook for 2026, at 1.4 per cent compared to 1.6 per cent previously. The commission acknowledged that a further escalation in trade tensions could depress GDP.

Key Takeaways:

  • The European Commission has cut its growth forecasts for the Eurozone to 0.9 per cent for this year, down from a previous estimate of 1.3 per cent.
  • The commission has also revised down its GDP growth outlook for 2026 to 1.4 per cent, from 1.6 per cent previously.
  • The revised forecast assumes reciprocal tariffs on most EU products would end up at 10 per cent, while sector-specific tariffs would stay at 25 per cent.
  • The commission recognized that a further escalation in trade tensions could depress GDP.
  • Inflation is expected to reach the European Central Bank's target of 2 per cent faster than expected by the middle of this year.
  • The Eurozone economy has outpaced expectations in recent quarters, expanding 0.3 per cent in the first three months of the year.
  • The German economy is now expected to flatline this year, previously estimated to grow 0.7 per cent.
  • France and Italy are expected to fare slightly better, with expected GDP growth of 0.6 and 0.7 per cent respectively in 2025.
  • Ireland, Spain, and Greece are expected to continue to outperform average Eurozone growth.

Statistics:

  • 0.9 per cent: the European Commission's revised growth forecast for the Eurozone this year
  • 1.3 per cent: the previous growth forecast for the Eurozone this year
  • 1.4 per cent: the revised GDP growth forecast for 2026
  • 1.6 per cent: the previous GDP growth forecast for 2026
  • 10 per cent: the assumed reciprocal tariffs on most EU products
  • 25 per cent: the assumed sector-specific tariffs
  • 2 per cent: the European Central Bank's target inflation rate
  • 0.3 per cent: the Eurozone economy growth in the first three months of the year
  • 0.7 per cent: the previously estimated German economy growth this year

Sources:

  • European Commission press release, date not specified.
  • EU executive official Valdis Dombrovskis, quoted in the article.
  • US President Donald Trump, quoted in the article.
  • European Central Bank, target inflation rate of 2 per cent.
  • European Commission, Eurozone economy growth data.

Read more