Tariff Uncertainty Threatens to Drag Down Europe’s Economic Growth

Europe’s economy will grow more slowly than expected this year, dragged down by trade uncertainty from President Trump’s tariffs, despite increasingly stable prices on consumer goods and energy, European Union economists said on Monday.

In its spring economic forecast, the European Commission, the trade bloc’s administrative arm, said it expected the gross domestic product of the 20 countries using the euro to grow just 0.9 percent in 2025, down from the 1.3 percent that had been forecast last fall. Economic growth across the European Union is expected to increase 1.1 percent in the same period, down from a previous expectation of 1.5 percent, the commission said.

Germany, Europe’s largest economy, has been hit particularly hard by the increase in tariffs, with the commission expecting that country’s economy to stagnate as exports decline 1.9 percent in 2025. France also had its projected growth rate cut to 0.6 percent from 0.8 percent, and Italy’s fell to 0.7 percent from 1 percent.

“Heightened global uncertainty and trade tensions are weighing on E.U. growth,” Valdis Dombrovskis, the European commissioner responsible for the trade bloc’s economy, told reporters in Brussels.

The commission added that any de-escalation of the tensions between Europe and the United States set off by Mr. Trump’s imposition of a 10-percent import tax on European good could lead to stronger growth, as could new free trade agreements with other economic partners.

On Monday, Britain and the European Union reached a deal aimed at removing some of the barriers to trade that Brexit had introduced.

Growth is expected to return in 2026, the commission said, but it also scaled that projection back to 1.4 percent for the euro area, down from a previously projected 1.6 percent.

One bright spot is the continued robustness of the European labor market, Mr. Dombrovskis said, citing 1.7 million jobs added last year and an expected two million to be added in the coming year.

Increased spending on armaments and the military could help spur more growth across Europe, the commission said. The 500 billion euros the German government plans to invest in its defense infrastructure were not included in the forecast for this year, but they were expected to contribute a full percentage point to growth by 2028, Mr. Dombrovskis said.

Germany has been stuck in stagnation for three years running, dragging down growth across all of the European Union.

The economists also warned that the threat of further natural disasters, related to changes in the global climate, were a risk to growth. Europe suffered widespread flooding and extreme heat in 2024, and the continent is bracing for more extreme weather this year.