Brussels (Belgium) (AFP) – The eurozone economy expanded more than expected at the start of the year, official data showed on Wednesday, despite US President Donald Trump’s tariffs. However, global trade tensions threaten more pain and near stagnation in 2025. The EU’s official data agency reported that the 20-country single currency area recorded growth of 0.4 percent over the January-March period from the previous quarter. This figure was higher than the 0.2 percent forecast by analysts for Bloomberg and comes after the eurozone economy grew by 0.2 percent in the final quarter of 2024.
The 27-country European Union economy expanded by 0.3 percent, following a growth of 0.4 percent between October and December. The better-than-expected data appears to be linked to advance purchases in the United States, made before Trump’s tariffs came into effect. However, experts remain cautious about the outlook for the year as a whole, which they describe as lacklustre. On April 2, Trump imposed sweeping 20 percent levies on a majority of European goods, later announcing a 90-day pause; nevertheless, a worldwide 10-percent levy rate remains.
If Brussels and Washington fail to reach an agreement, the higher tariffs will kick in, leading to chaos and a painful trade war for Europe. Additionally, Trump’s 25-percent tariffs on steel, aluminium, and auto imports are still in effect. “The economy started the year on a stronger footing than we expected and activity surveys suggested,” said Franziska Palmas, senior Europe economist at London-based Capital Economics. “Nevertheless, we still expect growth to slow sharply in the next six months as the US tariffs introduced in April will hit activity, and any boost from German fiscal stimulus will mostly be felt next year,” Palmas added.
Several European companies increased their shipments at the start of the year to avoid Trump’s higher tariffs. For example, Ireland’s exports to the United States jumped 210 percent in February to nearly 13 billion euros ($14.8 billion), with 90 percent of those exports being pharmaceutical products and chemical ingredients. The eurozone’s strong performance in the first quarter “is partly due to the 3.2 percent quarter-on-quarter increase in GDP in Ireland, where GDP tends to be very volatile and the boost from front-running of US tariffs is likely to have been quite big,” Palmas noted.
Europe has been mired in stagnation for two years, primarily held back by soaring energy costs following Russia’s invasion of Ukraine in 2022. This month, the International Monetary Fund cut its annual growth forecast for the eurozone by 0.2 percentage points to 0.8 percent in 2025, citing expectations that trade tensions with the United States will adversely affect Europe. Among major economies, Spain showed notable growth of 0.6 percent in the first quarter compared to the previous three-month period. In contrast, France, facing political instability and a planned austerity program, weighed down the eurozone, with growth of only 0.1 percent between January and March. Germany, Europe’s largest economy, also exceeded expectations with a growth of 0.2 percent in the first quarter of the year compared to the previous quarter.
© 2024 AFP
