The eurozone is also dealing with increased policy uncertainty after major developments regarding US tariffs. Liberation Day and Reversal Day have already passed. Sadly, they’ve failed to provide clarity on the direction of US tariff policy, and industry and the region were left wanting for a clearer economic forecast in light of this disappointment. Rather, these events have resulted in a more complicated economic environment, making it a confusing and treacherous road for businesses and policymakers alike.
Despite expectations for change, the universal tariff of 10% remains in place. Additionally, separate tariffs of 25% on steel, aluminum, cars, and car parts continue to affect trade relations and economic recovery efforts. These tariffs will only further impede eurozone recovery in the near term. Consequently, the economic environment will be further confounded as the region community of communities strives to return to normalcy.
Inflation figures for March paint a picture of high costs continuing to ease. Headline inflation is now 2.2%, a decline from 2.3% in February. Core inflation saw a similar decrease, falling to 2.4% down from 2.6% prior. Taken together, this trend indicates that although inflation is still a major issue, there are some indications of stabilization in key areas of the economy.
The European Central Bank (ECB) helped provide a counterweight through aggressive monetary policy intervention as the trade war escalated. First, they reduced the deposit rate by 25 basis points to 2.25%. This was forecasted to be the right decision. It’s a more dovish approach than that, and it’s meant to address the economic pressures stemming from tariffs. Yet the tone struck in the following press conference clearly focused on the tariff-induced obstacles to achieving those rosy growth projections.
“The ECB cut the deposit rate by 25bp to 2.25%, as widely expected. The tone in the press conference was dovish, reflecting the tariff hit to the growth outlook.” – Jan-Paul van de Kerke and Bill Diviney
The Governing Council of the ECB had members who favored a pause before implementing the April cut, indicating a division of opinion on how best to address the evolving economic landscape. The question mark involving tariffs has only intensified worries on fiscal policy and its adverse effects on growth projections for 2026.
Falling wage growth is perhaps the most important driving force behind rising eurozone inequality. Indeed tracker, wage growth, post-pandemic low During the first quarter of this year, it barely touched 2.7%. This dip in wages may add an additional hurdle to consumer spending and the nation’s broader economic recovery.
US tariff policy pledged to become known on Liberation Day It was intended to provide a transparent strategy for investors and companies and for government authorities across the eurozone. As analysts have observed, it has actually created more confusion and uncertainty.
“Liberation Day was supposed to provide clarity on future US tariff policy and by that a more certain eurozone economic impact. Liberation day, and one week later “Reversal Day” have – if anything – only lead to more policy uncertainty.” – Jan-Paul van de Kerke and Bill Diviney
The 90-day pause on mutual tariffs was supposed to be a stopgap relief measure. Until there is a clear resolution and more information about long-term tariff policies is made available, businesses are still hesitant to commit to long-term plans or measures.