Eurozone Economy Expands, Tariff Threat Endures
EU‑United States tariff pact could dent eurozone GDP
Unexpected GDP growth in Q2 2025
The Eurostat agency reported a 0.1 percent expansion during the April‑June quarter for the 20‑country single‑currency zone, surpassing the 0.0 percent forecasts from Bloomberg and FactSet.
Key member‑state performance
- France grew by 0.3 percent, beating expectations.
- Spain led the way with a robust 0.7 percent increase.
- Germany unexpectedly contracted by 0.1 percent.
- Italy also recorded a 0.1 percent shrinkage.
Trade tensions and tariff agreement
Since former President Donald Trump returned to the White House in January, the U.S. imposed a series of steep tariffs on the EU. A Sunday deal aims to halt a potential trade war, but most EU exports will still face a 15 percent tariff.
Economic outlook and potential impact
Capital Economics’ senior Europe economist Franziska Palmas warned that the 15 percent U.S. tariff could subtract roughly 0.2 percent from the eurozone’s GDP, likely keeping growth weak for the rest of the year.
Current and future negotiations
- European firms rushed to ship goods in the first half of the year to avoid Trump’s higher tariffs.
- France’s Economy Minister Eric Lombard highlighted the resilience of French companies amid U.S. tariff hikes.
- France is now pushing for zero tariffs on alcohol, including champagne, wines, and spirits; talks on this issue are still ongoing.
- European officials said the deal includes bilateral tariff exemptions for certain goods, but the exact goods remain to be finalized.
Overall 27‑country EU growth
The broader EU economy expanded by 0.2 percent from April to June, following 0.5 percent growth in the first quarter.
