Europe saw faster economic growth early this year but Trump’s tariffs have dimmed its prospects

Europe’s economy grew more strongly in the first three months of the year, only to see hopes for an ongoing recovery quickly squelched by US President Donald Trump’s trade war.

Europe’s economy grew more strongly in the first three months of the year, only to see hopes for an ongoing recovery quickly squelched by US President Donald Trump’s trade war. Gross domestic product in the 20 countries that use the euro grew 0.4% in the first quarter, improving on 0.2% growth in the last part of 2024, according to official figures released Wednesday. But on April 2, just two days after the end of the quarter, Trump announced an onslaught of new tariffs on almost every US trading partner and hit goods imported from the European Union with a 20% tariff rate. That has led to widespread downgrading of Europe’s economic growth outlook for the year since its economy is heavily dependent on exports and the United States is its largest single export destination. Although Trump has announced a 90-day pause on what he calls his “reciprocal” tariffs — so named because they are based on how he feels other countries have been treating the US — prospects that the EU can strike a bargain to reduce the 20% figure are highly uncertain. Meanwhile, other tariffs — such as a 25% rate on steel and aluminum and on cars, both of them for all trading partners, including Europe — remain in place. The costs of tariffs are paid by the companies that import European goods such as cars and pharmaceuticals, which then have to decide whether to swallow the costs or pass them on to the consumer in the form of higher prices. As a result, indicators of business and consumer optimism in Europe have fallen. The European Commission’s economic sentiment indicator sagged to 93.6 in March, its lowest level since December. That drop in sentiment is “another illustration of how the last four weeks of tariff tensions and uncertainty have entirely wiped out the tentative return of optimism in the eurozone,” said Carsten Brzeski, global head of macroeconomics at ING bank.