Brussels – The European Commission has revised its economic forecast, predicting slower growth for the eurozone in both this year and the next, largely due to the ongoing trade conflict initiated by the United States and continuing uncertainty about its resolution.
How will U.S. tariffs impact eurozone GDP growth?
In its updated economic outlook for the 27 European Union member states and the 20 countries that use the euro, the Commission projected that the eurozone’s gross domestic product (GDP) will expand by only 0.9% in the current year. This marks a notable decline from the 1.3% growth it had forecast in November last year.
Looking ahead to 2026, eurozone growth is expected to recover modestly to 1.4%, although this is still below the 1.6% previously forecast by the Commission.
“The outlook for growth is revised significantly downward. This largely owes to a weakening global trade outlook and higher trade policy uncertainty,”
the Commission stated in its report.
The updated forecast assumes that the United States will maintain existing tariffs, including a 10% tariff on all EU goods, a 25% tariff on steel and aluminum, a 25% duty on cars, and exemptions on pharmaceuticals and semiconductors.
“Risks to the outlook are tilted to the downside. Further fragmentation of global trade could mitigate GDP growth and reignite inflationary pressures. Climate-related disasters are also more frequent and remain a persistent source of downside risk for growth,” the Commission added.
Can the eurozone recover amid global trade tensions?
Analysts suggest that an improvement in EU-U.S. trade relations could boost eurozone growth. Additionally, diversifying trade partnerships and increased defense spending could also support economic recovery in the region.
The Commission also noted that the eurozone’s unemployment rate is projected to continue its downward trend, falling to 6.1% by 2026. Meanwhile, consumer inflation is expected to slow to 2.1% this year and further decrease to 1.7% by 2026, from 2.4% recorded the previous year.
In contrast, the region’s public finances are forecast to weaken. The budget deficit is expected to increase slightly to 3.2% of GDP this year from 3.1% last year, with a further rise to 3.3% by 2026. Public debt across the euro area is expected to grow to 89.9% of GDP in 2025, up from 88.9% in 2024, and projected to reach 91% by 2026.
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