UBS has revised down its Eurozone Gross Domestic Product (GDP) forecast for the third time in just seven days, highlighting the high level of uncertainty stemming from US President Donald Trump’s tariff strategy and Europe’s fiscal response.
The latest revision, published on Monday, saw Eurozone GDP growth forecasts for 2025 and 2026 raised by 0.2 percentage points to 0.7% and 1.0% respectively. The forecast for 2027 remained at 1.5%.
The investment bank said the adjustment was made following the suspension of US retaliatory tariffs on most countries, which has reduced the economic impact of the original trade policy announcement.
“The latest revision is made on the assumption that current tariff levels will remain permanent,” UBS economists led by Reinhard Cluse said in a note.
Just a week earlier, on April 8, UBS had lowered its growth forecast to 0.5% for 2025 and 0.8% for 2026, following “significant increases in US tariffs” and the launch of a defence and infrastructure stimulus package by Europe.
UBS then published another scenario analysis after President Trump suspended retaliatory tariffs on most countries.
According to the analysis, if these lighter tariffs remain in place after the 90-day moratorium, they “could reduce the economic damage to the Eurozone economy by 0.4 percentage points to 0.2 percentage points in 2025,” the economist said.
UBS warned that the current situation is not yet stable. “We are cautious that the current tariff level is not a ‘stable equilibrium’,” noting that US tariffs on EU exports have risen from below 2% to over 20%, before being reduced to around 11–12%.
If no further reductions are negotiated during the moratorium, the EU could retaliate, potentially reigniting trade tensions.
“At least in the short term, it is likely to cause more damage to GDP growth and possibly push inflation higher,” the economists explained.
They also added that a cycle of retaliation could ensue, which could eventually bring the two sides back to the negotiating table and pave the way for lower average tariff rates—although that is still uncertain.
The revisions at the country level were also cautious. The forecast for Germany in 2025 was raised by 0.3 percentage points to 0.0%, with UBS still expecting a “technical recession” in the second half of the year.
France and Italy saw small increases of 0.1 points for 2025, while Spain, expected to lead growth among the major Eurozone economies, was also revised up to 2.4% for 2025.
