BRUSSELS — The European Commission has revised its economic outlook for the eurozone, citing escalating trade tensions and uncertainty over U.S. tariff policies. The eurozone’s gross domestic product is now projected to grow by 0.9% in 2025, down from the previous estimate of 1.3%. The forecast for 2026 has also been adjusted to 1.4% from an earlier prediction of 1.6%, according to the European Commission.
The downgrade follows U.S. President Donald Trump’s implementation of tariffs, including 25% levies on EU steel, aluminum and cars, with broader import tariffs temporarily reduced to 10% during ongoing negotiations. The European Commission attributes the slowdown to reduced global trade and rising policy uncertainty.
Germany’s economy, the largest in the eurozone, is expected to stagnate in 2025, while France and Italy are forecast to grow by 0.6% and 0.7%, respectively. In contrast, Ireland, Spain and Greece are predicted to outperform the eurozone average.
Despite these challenges, the Commission notes that inflation is projected to hit the European Central Bank’s 2% target sooner than expected, moderating to 1.7% in 2026. Unemployment in the eurozone is projected to decline to 6.1% by 2026, down from 2.4% inflation in 2024.
The Commission warns that risks such as trade fragmentation and climate-related disasters pose additional threats to growth. However, easing trade tensions or increased trade and defense spending could provide some upside.
The European Union has paused retaliatory tariffs for 90 days and offered the United States a mutual tariff freeze on industrial goods, but President Trump’s willingness to negotiate remains uncertain.
