The European Commission has revised its economic growth forecast for the European Union, citing trade tensions and geopolitical uncertainties as potential risks. The forecast, released on Monday, predicts a 1.2% growth rate for the eurozone in 2026, down from the previously estimated 1.4%. The broader EU is expected to grow by 1.4%, a decrease from the initial 1.5% forecast.

According to officials, trade tensions caused by US tariffs are among the possible negative factors contributing to the revised forecast. In July, the European Commission signed a trade deal with the US, which imposed a 15% tariff on EU exports of cars and most other goods. The agreement also requires the EU to purchase $750 billion of US oil and gas and invest $600 billion in the US economy.

The European Commission attributes the downgrade to higher-than-expected US tariffs on EU exports and uncertainty surrounding potential further US actions. “Persistent trade policy uncertainty continues to weigh on economic activity, with tariffs and non-tariff restrictions potentially constraining EU growth more than expected,” the commission stated. EU economy chief Valdis Dombrovskis echoed this warning, noting that “trade barriers have reached historic highs” and that the EU’s open economy remains vulnerable to ongoing trade restrictions.

The commission also warned that any further escalation of geopolitical tensions could intensify supply shocks, while climate-related disasters pose significant risks to EU growth. In contrast, the forecast for 2025 has been revised upward, primarily due to a surge in exports ahead of expected tariff hikes. The eurozone is now expected to grow by 1.3%, up from 0.9% in May, and the broader EU by 1.4%, up from 1.1%.

Despite the revised forecast, the commission noted that the outlook remains subject to high uncertainty, with the balance of risks tilted to the downside. Dombrovskis urged the EU to take resolute action to support its economy by accelerating single market integration and reducing red tape. The European Commission’s revised forecast highlights the ongoing challenges faced by the EU in navigating trade tensions and geopolitical uncertainties. As the global trade landscape continues to evolve, the EU’s ability to adapt and respond to these challenges will be crucial in determining its economic growth and competitiveness.