Craig Stirling
9 min read
(Bloomberg) — European Union officials may cut growth forecasts for 2026 in the coming week in an assessment of damage to the region’s economy, a year after Donald Trump won back the White House.
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The outlook to be released in Brussels on Monday will point to the cumulative impact of trade threats and higher tariffs imposed by the US, along with the challenges of persistent weakness in Germany and political turmoil in France.
Forecasts released in May were already downbeat in the wake of President Trump’s market-jolting “Liberation Day” announcement of levies the previous month, followed by a climbdown as he suspended action to pursue deals. In their own accord with the US clinched in July, Brussels officials ended up swallowing 15% tariffs on most EU goods.
The fallout for 2025 has ended up being less severe than feared. The European Commission earlier predicted a 0.9% increase for gross domestic product in the euro area, and it’s likely to raise that estimate this time around.
For 2026, though, hopes of a mild pickup to the 1.4% predicted in May are now looking unlikely, with the European Central Bank having anticipated 1% growth in its last forecasting round in September.
Describing the challenges for the current quarter, Frankfurt officials said at their last meeting that “still-elevated uncertainty, higher effective tariffs, a stronger euro and increased global competition are expected to hold back growth.”
Trade uncertainty is just one part of the story. Despite a spending binge on defense and infrastructure in Europe’s biggest economy, what could have been Germany’s first meaningful year of growth since the aftermath of the pandemic is now looking less impressive. The government’s Council of Economic Experts has lowered its outlook for expansion in 2026 to below 1%.
In France, Europe’s No. 2 economy, political instability is an ongoing challenge. While growth there is proving resilient, uncertainty is shaving about 0.5 percentage point off expansion, with domestic political and budget turbulence accounting for at least 0.2 point of that, according to the Bank of France.
France is likely to own the region’s worst deficit in the EU’s outlook for public finances. One bright spot is Italy, which has brought its own shortfall down to the bloc’s 3% ceiling faster than anticipated, and may even get an upgrade from Moody’s Ratings on Friday.
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