Shot by both sides, the Eurozone faces recession threat

Subscribe to enjoy similar stories. The eurozone economy has never been far from recession over the three years since Russia’s invasion of Ukraine sent energy prices surging. It may finally be tipped over the edge by a fresh blow from another direction, as the Trump administration targets its exports.

The U.S. and eurozone economies parted ways in 2022, with the former growing rapidly while the latter faltered under the burden of sharply higher energy costs and the blow to confidence from the largest military conflict to hit Europe in eight decades. To the surprise of many economists, the eurozone has avoided a recession, if only just.

Indeed, the only quarter of slight contraction came at the end of 2022, when high energy bills limited the ability of many households to spend on other goods and services. While its own consumers were tightening their belts, European businesses could at least sell to other parts of the global economy that had been less wounded by the war, including the U.S. But the announcement Wednesday of a 20% U.S.

tariff on imports from the European Union may prove to be one blow too many. “The direct impact of lower exports will drag growth down but even more damaging could be the broader shock to confidence," said Gaurav Ganguly, an economist at Moody’s Analytics. “If negotiations fail to yield concessions and these tariffs remain in place, the eurozone will slip into recession this year." The eurozone economy may yet escape a sustained contraction.

Estimates of the impact of tariffs vary widely, and some key sectors have been exempted for now, such as pharmaceuticals. In March, the ECB’s economists forecast that the eurozone economy was set to grow by 0.9% this year and 1.2% in 2026. Their estimates