EU Slashes Growth Forecasts on US Trade Tensions

The European Commission has sharply downgraded its economic growth forecasts for the eurozone and EU for both 2025 and 2026, citing the impact of heightened US tariffs, persistent trade policy uncertainty under President Trump, and ongoing disputes with China. The eurozone is now expected to grow 0.9% in 2025 and 1.4% in 2026, with Germany’s export-dependent economy stagnating. Trade tensions and threats of further tariff escalations have disrupted global trade, weighing on business confidence and investment. Despite these challenges, the EU labor market is projected to remain strong, with unemployment reaching record lows. Inflation is expected to moderate and meet the European Central Bank's 2% target by mid-2025. Downside risks persist from further trade fragmentation and climate-related disasters, though de-escalation or new trade deals could improve the outlook.