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Trade uncertainty over US President Donald Trump’s plans to hit the European Union with tariffs is already affecting the bloc by putting a lid on investment, according to EU Economy Commissioner Valdis Dombrovskis.
A fresh rise in energy prices in recent months has also put a drag on output, he told a news conference following a meeting of euro-area finance ministers in Brussels on Monday.
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Still, a resilient labor market and disinflation that “remains on track” should help to bring a gradual pick-up in growth momentum, though less than previously thought, Dombrovskis said.
“We expect the EU economy to grow at a slightly slower pace compared to what we had projected in the autumn forecast,” he said. The European Commission predicted in mid-November that the pace of expansion would speed up to 1.5% this year in the EU and 1.3% in the euro zone.
Trump ordered his administration on Thursday to consider imposing reciprocal tariffs on numerous trading partners and also floated auto levies — a move that would be a particular hit to German carmakers.
The president cited barriers in the EU, including a value added tax, as an example of unfair trading rules that the US is looking to respond to. The EU is still waiting to learn the details of Trump’s proposal, for which he set an April 1 deadline.
Dombrovskis said declarations from the new US administration showed its commitment to the transatlantic partnership “cannot be taken for granted.”
“We regret the recent announcement of tariff measures and will be ready to respond in a firm and proportionate way,” he said. “The uncertainty relating to our trade policies has substantially increased and is already having a negative impact on the global economy, including on the US. But also the EU is affected.”
The euro area managed to achieve surprise growth of 0.1% in the last quarter of 2024. Still, the picture among the bloc’s four biggest economies was mixed, with Spain growing 0.8%, Italy stagnating, and Germany and France both contracting.
The European Central Bank, which is loosening monetary policy, has said it expects headwinds to persist this year but sees the conditions in place for a recovery. It predicts growth will accelerate to 1.1% in 2025.
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