EU Executive Committee cuts eurozone GDP growth forecasts due to US trade standoff

The European Union's Executive Committee stated that the eurozone GDP will grow by just 0.9% this year in its outlook for the 27 member states and the 20 euro-using countries. Last November, it had projected growth of 1.3%.

In 2026, eurozone economic growth is expected to reach 1.4%, down from the 1.6% forecast six months ago.

The forecast is based on the assumption that the United States will keep its trade duties at current levels of 10% on all EU goods, and at 25% on steel, aluminum, and automobiles. Meanwhile, tariffs on pharmaceuticals and semiconductors are not expected to be introduced.

However, GDP growth could improve if trade tensions between the EU and the US ease or if Europe expands trade with other regions more rapidly.

According to the European Commission, the eurozone unemployment rate is projected to continue declining this year and next, reaching 6.1% by 2026. Consumer inflation is expected to slow to 2.1% this year and 1.7% in 2026, down from 2.4% in the previous year.

Public finances in the eurozone are expected to worsen. The aggregate budget deficit is forecast to rise from 3.1% of GDP last year to 3.2% this year, climbing further to 3.3% by 2026.

Similarly, total eurozone public debt is projected to increase from 88.9% of GDP in 2024 to 89.9% this year, reaching 91% in 2026.