The European economy showed growth of only 0.1% in the second quarter

• The EU's GDP increased by only 0.1% in the second quarter of 2025.
• Germany and Italy reported a decrease in production by 0.1%.
• It is expected that the new tariffs from the USA will negatively impact the economic growth of the EU.

The European economy barely grew in the second quarter of 2025, despite previous increases in goods deliveries before the new tariffs from the USA took effect. According to data from the EU statistical agency Eurostat, the gross domestic product (GDP) increased by 0.1% compared to the previous quarter in 20 countries that use the euro. In annual terms, the growth was 1.4%.

Prospects for the upcoming months look bleak, with an average of 15% tariffs imposed on European goods in the USA due to the EU-USA trade agreement. This increased tariff may burden European exports, which could lead to price increases for consumers in the USA or reduced profits for companies.

The European economy shrank after strong growth of 0.6% in the first quarter, which was stimulated by the company's efforts to shift goods ahead of new tariffs announced by US President Donald Trump on February 2. Production fell by 0.1% in Germany and Italy, while in France, growth of 0.3% was secured due to increased car and aircraft stock, regardless of stagnation in domestic demand. Spain remained the only strong performer among the four largest economies in the eurozone with a rate of 0.7%.

French economist Paul Mass, a senior economist at Capital Economics, noted that the 15% US tariff will likely reduce GDP in the region by about 0.2%, thus the growth is likely to remain weak until the end of the year.

The German economy remains approximately at the same level as before the pandemic six years ago, as its export-oriented sector continues to face serious problems, such as increased competition from China, a shortage of qualified workers, high energy prices, and aging infrastructure.

Mass also mentioned that Germany is likely to suffer more than other large economies under the impact of tariffs and will continue to face difficulties this year, especially with increased government spending under the new Chancellor Friedrich Merz, aimed at addressing infrastructure deficits, which will begin stimulating the economy in 2026.

In the middle of the year, the German government approved a budget project for 2026, which anticipates another year of record investments, including in modernizing transport infrastructure, housing construction, ensuring security, and digitization. Spending is expected to rise to 126.7 billion euros ($146.2 billion) in the upcoming year from 115.7 billion euros in 2025.

"Our priority is ensuring jobs and ensuring new economic strength," said Finance Minister Lars Klingbeil.

Tags: Europe/Economy