Eurozone Economic Expansion Slows in First Quarter Due to Trade Conflicts and Geopolitical Issues

Economic growth in the Eurozone came in slightly below expectations in the first quarter of the year, with GDP rising by 0.3% compared to the previous quarter, according to Eurostat. Initial estimates published on April 30 had indicated a 0.4% growth for the 20 countries in the Eurozone. Growth for the entire European Union (27 countries) also remained steady at 0.3%.

This modest performance, despite being below forecasts, was largely driven by pre-emptive purchases from the United States ahead of the implementation of new tariffs in March and April, experts say. However, the outlook for the year remains gloomy. The US trade measures announced by President Donald Trump have contributed to a slowdown in American growth, with US GDP contracting unexpectedly by 0.1% in Q1 compared to the previous quarter.

The European Commission is currently negotiating with Washington in an effort to remove the 25% tariffs on cars, aluminum, and steel, as well as 10% tariffs on other products. Europe has faced an economic downturn for two years, largely due to rising energy prices stemming from the Ukraine crisis, with only a very limited recovery expected this year.

On April 22, the International Monetary Fund (IMF) downgraded its growth forecast for the Eurozone by 0.2 percentage points to 0.8% for 2025, following a projected 0.4% growth in 2024, citing trade tensions. The gap with the US, which has experienced the strongest growth globally for years, is narrowing as its economic activity slows.

The IMF also cut its forecast for the world’s largest economy by 0.9 percentage points to 1.8% growth in 2025, down from 2.8% last year.

The European Commission is set to release its latest growth forecasts for the Eurozone for 2025 and 2026 on Monday, amid cautious economic sentiment.