Europe quietly maintains economic momentum while the United States stumbles, creating fresh tension across the Atlantic. Forecasters expect the European Union to grow 1.1 % in 2025 and 1.5 % in 2026. Early data show both the EU and the euro area already rose 0.3 % in the initial three months of 2025. Prices are cooling too; the European Central Bank thinks inflation will hit its 1.7 % target in 2026, earlier than once feared. Technically, GDP flash estimates now cover 99 % of euro-area and EU GDP, underscoring the reliability of these first-quarter figures.
Even so, tariffs coming from Washington have cut into European growth plans, showing once again how transatlantic relations affect everyday business.
U.S. tariffs chip away at Europe’s projected upswing.
American output paints a worer picture. U.S. GDP fell 0.1 % from last quarter to this one and is now expected to soften through the year. Yet from 2008 to 2023 the U.S. economy jumped 87 %, far beyond the EU’s 13.5 % rise. By 2023 Europe’s total output was only two-thirds the size of America’s and its income per person dropped to half the U.S. level.
Only four of the world’s top fifty tech firms sit in Europe, a fact that underscores the region’s struggle with economic competitiveness. As Europe’s unemployment hovers at 5.9 % this year and is set to ease to 5.7 % in 2026, each marginal jobs gain helps household consumption.
Tariffs help explain some of the current angst. The U.S. now slaps about 30 % duties on Chinese goods but still keeps a lighter 5 % average on European products. Yet the shifting rules unsettle supply chains and force firms on both sides to guess the next move.
Washington has hinted it may ease some levies on Canada, Mexico, and China later this year, which could lower American import costs and nudge the Federal Reserve to trim interest rates. Lower Fed rates might help U.S. shoppers, yet any pickup in American demand will also reshape what Europe ships abroad.
The Draghi report warns Europe that weak productivity could threaten living standards unless reforms appear soon. Leaders watch uneasily as U.S. policy talk ranges from Greenland to the Panama Canal, stirring wider geopolitical quarrels.
While the continent stays afloat, the gap in size and tech power remains plain.
