European officials have lowered their growth projections for this year and next due to US President Donald Trump's tariff onslaught, even if the highest tariffs on the majority of goods are negotiated away.
According to the European Union's executive commission's regular spring prediction released Monday, the forecast for the 20 nations that use the euro currency this year was lowered from 1.3% in November to 0.9%.
The forecast for 2026 was cut to 1.4 per cent from 1.6 per cent.
One reason for the lower growth estimate was the stagnating economy in Germany, where growth is expected to be zero this year after two years of shrinking output.
Germany's economy is heavily dependent on exports but has faced strong headwinds from higher energy costs after the loss of Russian natural gas due to the invasion of Ukraine as well from lack of pro-growth infrastructure spending and competition from China in autos and industrial machinery.
The proposal for a 20 per cent US tariff on imported goods from Europe in addition to its suspension for 90 days have meant uncertainty “not seen since the darkest days of the COVID-19 pandemic,” said Economy Commissioner Valdis Dombrovskis.
Also read: Trade war blues slow China's economy, hit retail, housing
He said the European economy remained “resilient” and that the jobs market remained robust, with the commission predicting a fall in unemployment to a record low 5.7 per cent next year.
And the risks are “tilted to the downside”, he said. One reason: The forecast assumes that the proposed 20 per cent rate can be reduced through negotiations with Washington to the base tariff rate imposed on all countries of 10 per cent.
While the EU's top trade official, Maros Sefcovic, has spoken several times with administration officials it remains uncertain how willing Trump might be to reduce the rate.
The forecast assumed that 25 per cent tariffs on steel and autos from all countries will remain in place, as would exemptions on computer chips and pharmaceuticals.
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