Volkswacht Bodensee - Eurozone economy expands but tariff impact looms

The EU's official data agency said the 20-country single currency area recorded growth of 0.1 percent over the April-June period from the previous quarter.

Since US President Donald Trump returned to the White House in January, he has hit the EU with a series of painful tariffs, but the bloc struck a deal Sunday to avert an escalating trade war.

EU officials hope the agreement will bring welcome certainty for companies and stave off further economic pain, but analysts warn Europe will still take a hit to its output from the deal, which foresees a 15-percent tariff on most exports.

Eurostat data on Wednesday showed Europe's second-largest economy, France, beat expectations to grow by 0.3 percent in the second quarter, but it was Spain that was the star performer, recording growth of 0.7 percent between April and June.

Europe's economic powerhouse, Germany, unexpectedly shrank by 0.1 percent from the previous quarter. Italy's economy also contracted by 0.1 percent in the same period.

The eurozone figure was better than 0.0 percent predicted by analysts for Bloomberg and FactSet, and comes after the single currency area's economy grew by 0.6 percent in the first quarter.

Economists have warned however against reading too much into the first quarter data as it was due to an extreme change in Ireland's figures.

The 27-country EU economy expanded by 0.2 percent over the April-June period from the previous quarter, after registering 0.5 percent growth in the first three months of 2025.

- Weak growth expected -

The year has been full of uncertainty for Europe. Trump threatened 30-percent levies on most European goods if Brussels and Washington did not clinch a deal by August 1.

Sunday's agreement lacks details -- with much still being negotiated -- but the two sides confirmed a majority of EU products would face the 15-percent tariff rate, including pharmaceuticals and semiconductors.

Economists warned the deal would inflict some damage on the eurozone economy.

"With the 15 percent US universal tariff likely to subtract around 0.2 percent from the region's GDP, growth is likely to remain weak in the rest of this year," Franziska Palmas, senior Europe economist at Capital Economics, said.

In the first half of the year, European companies rushed to ship more goods to avoid Trump's higher tariffs.

France's Economy Minister Eric Lombard said the figures for France demonstrated the country's companies were, however, proving resilient to US tariff hikes.

France is now pushing for zero tariffs on alcohol including champagne and wines as well as spirits as talks are still ongoing on the issue.

European officials say the deal included an agreement on bilateral tariff exemptions for certain goods -- but which ones exactly remained to be nailed down.

L.Meier--VB