The European economy will grow more slowly than previously expected this year and next as higher U.S. tariffs hit exports, while inflation will cool more rapidly, the European Union’s economists said Monday.
In its twice-yearly report on the economic outlook, the European Commission warned that a further rise in tariffs would inflict more damage on the bloc’s economy, but also said increased spending on defense and a German investment drive to repair frayed infrastructure could lift activity.
The Commission said it now expects the combined gross domestic product of the 20 countries that share the euro to increase by 0.9% this year and 1.4% in 2026, an acceleration from the 0.4% growth recorded in 2024. It had previously forecast expansions of 1.3% and 1.6%, respectively.
“The unpredictable and seemingly arbitrary rationale behind the U.S. tariff announcements has raised uncertainty to levels not seen since the darkest moments of the Covid pandemic,” Valdis Dombrovskis, the top EU official responsible for the economy, said.
