Euro Zone Economic Growth Threatened by U.S. Tariffs

The Euro zone's economic growth could suffer more significantly from U.S. trade tariffs than initially estimated by the European Central Bank. The impact is expected to be greater than previously projected, potentially slowing growth and affecting inflation, with new estimates being prepared for policymakers.

Euro zone economic growth is poised for a harsher setback from U.S. trade tariffs than the European Central Bank had anticipated, according to four informed sources. The ECB recently forecasted a 0.5 percentage point dip in the growth rate due to a trade war, but current developments suggest greater repercussions.

The newly imposed tariffs by U.S. President Donald Trump are reportedly more damaging than earlier model predictions, prompting the ECB staff to calculate new figures, which policymakers will review on April 17. Sources indicate the impact may surpass a 1 percentage point drop, attributed to rising uncertainty and diminished confidence.

Although the ECB spokesperson declined to comment, it's evident that the sluggish economic activity poses a threat to price stability. Some economists argue that the potential for increased global trade fragmentation could usher in higher structural inflation down the line.

(With inputs from agencies.)