European economy sees growth of only 0.1% as scramble to get ahead of US
tariffs goes into reverse
[July 31, 2025] By
DAVID McHUGH
FRANKFURT, Germany (AP) — Europe's economy barely grew in the April-June
quarter as frantic earlier efforts to ship goods ahead of new U.S.
tariffs went into reverse and output fell for the continent's biggest
economy, Germany.
Gross domestic product grew an anemic 0.1% compared to the previous
quarter in the 20 countries that use the euro currency, the EU
statistics agency Eurostat reported Wednesday. Growth was 1.4% over the
same quarter a year ago.
And prospects are mediocre for the coming months, given the 15% tariff,
or import tax, imposed on European goods in the U.S. under the EU-U.S.
trade deal announced Sunday. The higher tariff will burden European
exports with higher costs to either be passed on to U.S. consumers or
swallowed in the form of lower profits.
The economy sagged after stronger than expected 0.6% growth in the first
quarter, a figure inflated by companies trying to move product ahead of
U.S. President Donald Trump's additional tariff onslaught that was
announced April 2, two days after the first quarter ended.
Output fell 0.1% in Germany and Italy, while growth of 0.3% in France
was boosted by a rise in auto and aircraft inventories while domestic
demand was otherwise stagnant. That left Spain as the only strong
performer among the four largest eurozone economies at 0.7%
“With the 15% U.S. universal tariff likely to subtract around 0.2% from
the region’s GDP, growth is likely to remain weak in the rest of this
year,” said Franziska Palmas, senior Europe economist at Capital
Economics.
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Workers change tube lights of the Euro sculpture in front of the
European Central Bank in Frankfurt, Germany, Dec.6, 2011. (AP
Photo/Michael Probst, File)
 Germany's economy remains roughly
the same size as it was before the pandemic six years ago, as its
export-dominated business sector struggles with multiple issues
including stronger competition from China, a lack of skilled
workers, higher energy prices, lagging infrastructure investment,
and burdensome regulation and bureaucracy.
Economist Palmas said that Germany "is likely to be
hit harder than other major economies by tariffs and continue to
struggle this year" before increased government spending from the
new government under Chancellor Friedrich Merz, aimed at making up
the infrastructure gap, starts to boost the economy in 2026.
On Wednesday, Germany’s Cabinet approved a draft 2026 budget that
foresees a second consecutive year of record government investment
in priorities such as modernizing transport infrastructure, building
homes, security and digitization. Spending is set to rise to 126.7
billion euros ($146.2 billion) next year from 115.7 billion euros in
2025.
“Our top priority is to secure jobs and ensure new economic
strength,” Finance Minister Lars Klingbeil said.
___
Geir Moulson contributed from Berlin.
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