The European Commission downgraded its estimates for the bloc’s growth in 2025 due to the effects of U.S. President Donald Trump’s tariffs.

The euro area is expected to grow by a mere 0.9 percent and the EU by 1.1 percent this year, according to the Commission’s annual spring forecast, which was published on Monday.

This is a significant downgrade from the Commission’s previous forecast in November, which predicted a growth rate of 1.5 percent in the EU and 1.3 percent in the euro area this year.

In the meantime, global trade was disrupted by Trump imposing tariffs on major partners such as the EU and China. “The outlook for growth is revised significantly downward. This largely owes to a weakening global trade outlook and higher trade policy uncertainty,” the Commission wrote.

“Higher U.S. tariffs and trade uncertainty are weighing on EU exports,” the EU's economy commissioner Valdis Dombrovskis told reporters after the figures were released. He added that uncertainty in Europe was at levels not seen since the outbreak of the Covid-19 pandemic in 2020.

“Risks to the outlook remain tilted to the downside,” Dombrovskis said, adding that escalating trade tensions in the months to come could further “depress growth and rekindle inflation.”

In a sign of de-escalation, Trump in April halved tariffs on most EU imports to 10 percent for 90 days, a temporary reprieve intended create space for a broader trade deal. EU experts have used this as the baseline scenario for their forecast and noted that striking new trade deals with other countries could boost growth in Europe.

“The world was largely unprepared for the sharp protectionist shift in U.S. trade policy,” the director general of the Commission’s economy department, Maarten Verwey, wrote in the introduction to the report.

The Commission noted that trade tensions between the U.S. and China contributed to the “uncertainty” that weighed more than tariffs on domestic demand, the EU writes.

Under a recent agreement, the U.S. cut tariffs on Chinese imports from 145 percent to 30 percent for 90 days. Meanwhile, the Chinese side agreed to drop its tariffs from 125 percent to 10 percent.

Despite the growing trade tensions, inflation in the EU is expected to continue dropping over the coming years. The euro area is expected to reach the European Central Bank’s inflation target of 2 percent in 2025.

In 2026, meanwhile, growth is expected to rise to 1.5 percent in the EU and 1.4 percent in the euro area. 

Politico

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