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EU Slashes Growth Forecast Amid Trade Tensions
2025-05-19 12:29:09
Europe
Economy

EU Slashes Growth Forecast Amid Trade Tensions

The European Commission has significantly lowered its economic growth forecast for the EU and Germany due to heightened trade tensions and geopolitical uncertainties. The EU's GDP is now expected to grow by just 1.1% this year, revised down from a previous forecast of 1.7%.

Germany faces an even tougher outlook, with growth stagnating at 0%. This downgrade is primarily attributed to increased US tariffs and abrupt changes in US trade policy, impacting Germany's export-driven economy.

Despite these challenges, the Commission anticipates a modest recovery by 2026, with a projected growth of 1.5% for the EU. Inflation is expected to decline, reaching the target of 2% in the euro area by mid-year.

The overall economic outlook remains uncertain, but the EU has shown resilience in navigating global trade tensions. Meanwhile, Spain's growth prospects have been revised upward, contrasting with the broader European trend, highlighting regional economic disparities within the bloc.

Related news on that topic:

China's Resilient Economy Amidst Trade Tensions

China's economy demonstrated resilience in April despite the ongoing trade tensions with the United States. Industrial output increased by 6.1% compared to the previous year, signaling robust economic activity even amid elevated tariffs. Although growth in retail sales and industrial production slowed, they still exceeded analysts' forecasts. This resilience is attributed to strong export performance, which offset the adverse effects of U.S. tariffs. The temporary reduction of tariffs following an agreement between Washington and Beijing has provided some relief. However, challenges such as weak domestic consumption and a struggling real estate sector persist. Despite these hurdles, China's economic growth prospects remain optimistic, with expectations to surpass a 5% growth rate in the second quarter. Additionally, notable growth in industrial robotics output highlights China's commitment to advancing automation and innovation. The country's economic stability suggests that aggressive fiscal stimulus measures may not be imminent, as analysts revise their growth outlook positively.

Navigating Market Uncertainty Amid Tariff Challenges

The recent stock market rally, fueled by President Trump's tariff rollbacks on China, raises questions about its durability. Analysts express concern that optimism may be premature, as trade agreements remain incomplete and tariffs are at historic highs. Major retailers like Walmart anticipate raising prices due to these tariffs, indicating potential inflationary pressures on consumers. Critics, including economist Peter Schiff, argue that the U.S. trade deal with China represents a concession rather than a victory, suggesting that tariffs will dampen economic growth and consumer spending. Treasury Secretary Scott Bessent acknowledges that Walmart will absorb some tariff costs but remains optimistic about ongoing negotiations. The geopolitical landscape remains unsettled, with discussions on tariffs affecting relations with Canada and emerging markets. Despite market volatility, the resilience of the U.S. economy has been noted, with historical recoveries from past crises. Investors are advised to stay the course despite uncertainties, emphasizing the importance of maintaining a long-term perspective in their strategies. The current environment underscores the need for tactical flexibility and strategic planning to navigate potential challenges while capitalizing on future growth opportunities.

Read 9 more recent news on this topic

The press radar on this topic:

EURACTIV.com
19. Mai 2025 um 09:02

‘Feeling the strain’: Brussels slashes EU growth forecast

The European Commission has sharply reduced its economic growth forecast for the EU, citing heightened trade tensions and geopolitical uncertainty. The EU's GDP is now expected to grow by just 1.1% this year, down from the 1.5% expansion predicted in November. The downgrade is mostly due to a steep reduction in the growth forecast for Germany, whose export-dependent industries are heavily exposed to global trade tensions. France, Italy, and the euro area as a whole also had their projected gro..
DER SPIEGEL
19. Mai 2025 um 09:20

EU Commission lowers growth forecast for Germany - DER SPIEGEL

The EU Commission has lowered its growth forecast for Germany in the current year to zero, after previously expecting a slight growth of 0.7 percent. The correction is justified by tariffs and global uncertainty, which burden consumption, investment and exports. According to the authority, the gross domestic product in Germany is not expected to grow again until 2026, by 1.1 percent. The forecast for the entire EU and the euro area was also slightly revised downwards.
AFP
19. Mai 2025 um 09:14

EU Commission Significantly Lowers Growth Forecast for EU and Germany

The EU Commission has significantly revised its growth forecasts for the EU and Germany downward. Only 1.1% growth is now expected for the EU, while Germany is even facing stagnation at 0.0%. The reasons cited include the effects of increased US tariffs and the uncertainty caused by changes in US trade policy. However, for 2026, the Commission predicts a growth of 1.5% for the EU and 1.4% for the Eurozone. Additionally, a decline in inflation to 1.7% in the Eurozone is expected.
n-tv.de
19. Mai 2025 um 10:01

Inflation is expected to decline: EU cuts growth forecast - German economy stagnates - n-tv.de

The European Commission has significantly lowered its growth forecast for the economy this year. Stagnation is expected for Germany, and growth has also been revised downwards for the EU and the euro area. The reasons given are the effects of the increased US tariffs and the uncertainty caused by changes in US trade policy. However, the Commission forecasts growth of 1.5% for the EU and 1.4% for the euro area again by 2026. In addition, a decline in inflation to the target of 2% is expected by..
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