The eurozone economy grew faster than expected last quarter, but threats of outsized tariffs from a possible Trump presidency, along with escalating trade tensions with Chinamaintain moderate prospects.
The Gross Domestic Product (GDP) of the 20 countries that share the euro grew 0.4% in the third quarter compared to the previous three months, exceeding expectations of 0.2%, but still showing some weakness, at a time when the industry is in recession and household consumption barely grew, according to Eurostat data published on Wednesday.
Compared to the same quarter of the previous year, block expansion increased to 0.9% from 0.6% three months ago, staying on track for growth for the full year, just below 1% and below what economists consider its “potential” or natural rate of expansion, without disruptions , nor stimuli.
The biggest surprise came from Germanythe bloc’s largest economy, which grew 0.2%, despite many officials predicting a recession due to the difficulties of its vast industrial sector.
Although France and Spain They also showed unexpected resilience, the figures confirm that the bloc remains behind the United States, which has done better for decades and whose lead gap has widened in recent years.
The annual growth of the United States was 2.8% in the third quarterthanks to the good health of consumption and abundant budgetary spending.
The growth gap between both economies could expand even further.
American presidential candidate donald trumpwhich has promised to impose tariffs of 10% on imports from all countries and 60% on those from China, warned on Tuesday that Europe will pay a “heavy price” if it wins.
Any new tariffs are likely to trigger retaliation, which would increase costs and reduce global tradea long-time driving force for Europe, an open economy that has relied heavily on the barrier-free movement of goods.
US trade hostility would add to the escalation of tensions with Chinaafter the EU decided overnight to increase tariffs on electric vehicles made in China to 45.3%, following a trade investigation that has divided Europe and provoked retaliation from Beijing.
Economic stagnation
He euro zone growth has not been much above zero for most of the past two years, as its dominant industrial sector took consecutive hits.
He rising energy costs Following Russia’s invasion of Ukraine reduced margins, while changes in automobile consumption patterns and China’s own economic weakness dented demand from its traditional customers.
All of this weighed on Germany and most of its officials warned that a significant rebound was not in sight and that 2025 would probably also remain below its potential.
As an example of the block’s difficulties, Volkswagen reported a 42% drop in operating profit on Wednesday due to weak results from the core automobile unit and high costs, including model renewal costs, which hit margins.
Households were expected to recover from weakness in the industrial sector, but consumption remained weak as families decided to increase their savings rather than spend more.
Future growth could also be affected by budget consolidationas many eurozone countries have spent too much in recent years and will now have to cut back on their budgetary largesse.
The economy of the European Union As a whole, with the eastern countries not belonging to the euro zone, it grew by 0.3%, compared to 0.2% three months earlier, and the interannual rate accelerated from 0.8% to 0.9%.
According to economists, the last quarter of the year will be similar to previous months, with the industry showing some signs of stabilization and consumer confidence recovering from its ultra-low levels.
