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The Eurozone economy grew 0.4 per cent in the first three months of the year, surpassing expectations, ahead of Donald Trump’s sweeping tariff announcements in early April.
The figure was twice as high as the 0.2 per cent of the previous quarter, according to a flash estimate by Europe’s statistical office Eurostat. Economists polled by Reuters had predicted that GDP growth would remain at that level.
Most analysts expect that the global trade war unleashed by the US president on “liberation day” on April 2 will damage the Eurozone’s subsequent economic performance.
Survey data in recent weeks has indicated that business confidence in the Eurozone had deteriorated significantly since the US president unveiled the duties, while growth has approached zero.
Carsten Brzeski, global head of macro at ING, warned in a note to clients on Tuesday that despite the partial suspension of Trump’s tariff announcements and exemptions for some goods, “applied tariffs are still higher than at the start of the year”.
Brzeski added that “the threat of more to come is still hanging over the global economy”, and that lingering uncertainty would be “another dampening factor for economic activity in the Eurozone”.
The euro was little changed after Wednesday’s data release at $1.137.
The European Central Bank lowered its 2025 growth prediction to 0.9 per cent last month — its sixth consecutive reduction — and is expected to lower it further in its updated forecasts in June.
The central bank warned that the outlook for growth had “deteriorated owing to rising trade tensions” when it cut interest rates in April to 2.25 per cent — the seventh reduction since June.
Traders in swaps markets assign a roughly 85 per cent chance to a further cut at the ECB’s next meeting in June, the same probability as before the publication of Wednesday’s GDP figures.
Figures released earlier on Wednesday showed that the German economy grew by 0.2 per cent in the first quarter compared with the previous three-month period, in line with expectations.
Europe’s largest economy had contracted by 0.2 per cent in the final quarter of 2024.
France’s economy barely grew in the first quarter, rising by 0.1 per cent, having contracted by 0.1 per cent in the final three months of 2024.
