18 July 2025, Bremen, Bremerhaven: Containers are handled at the overseas port.
Sina Schuldt/picture alliance via Getty Images)
The euro zone economy eked out a better-than-expected 0.1% growth in the second quarter, compared to the previous three-month stretch, flash data from Eurostat showed Wednesday.
Economists polled by Reuters had anticipated euro zone growth to flatline in the period, following a 0.6% expansion in the first quarter.
“The slowdown in euro-zone GDP growth in Q2 came as no surprise as the boost from tariff front-running waned,” Jack Allen-Reynolds, deputy chief euro zone economist at Capital Economics, said in a note.
“Overall, the data suggest that the euro-zone has been resilient to the shifts in US trade policy so far. Front-running of the tariffs gave the economy a boost in Q1, and the impact of trade policy uncertainty has seemingly been limited so far,” he added.
U.S. tariffs and their impact have been a top concern for European economies so far this year. U.S. President Donald Trump’s so-called reciprocal tariffs initially came into effect in April as the second quarter kicked off.
The duties were then however temporarily reduced, but the last few months have been plagued by much uncertainty as negotiations for trade agreement were underway. Some higher sectoral tariffs, including on autos and steel and aluminum, have also been in effect.
The European Union over the weekend agreed to a trade framework with the U.S., which includes 15% tariffs being imposed on the bloc. Some goods are set to be exempt, and levies on autos have been reduced to the baseline level.
European bond yields were little changed after the data release, with both the French and German 10-year bonds last up by less than one basis point.
German economy contracts
Earlier on Wednesday, preliminary data from statistics agency Destatis showed that output from the European Union’s largest economy, Germany, shrank slightly by 0.1% in the second quarter of 2025 from the previous three months.
The figure, which is adjusted for price, calendar and seasonal variations, aligned with the expectations of analysts polled by Reuters and marked a sharp slowdown compared to a revised 0.3% expansion in the first quarter.
Investment in machinery and equipment, as well as construction, were lower in the second quarter than in the previous three-month period, while private and government consumption expenditures increased, Destatis data signaled.
