The eurozone economy is highly likely to slow down in the third quarter of 2025 due to uncertainty in foreign trade and the curtailment of “advance” purchases, European Central Bank President Christine Lagarde said, speaking in Geneva on the platform of the World Economic Forum. According to her, the region’s export-oriented economy received a short-term boost in the first half of the year from partners’ restocking ahead of the imposition of US duties, but this factor is “reversing” and the slowdown was already evident in the second quarter.
Lagarde specified that under the agreement reached between the EU and the US, the “effective average rate” of tariffs on eurozone imports is estimated to be between 12% and 16%, slightly above the ECB’s June baseline forecast assumptions but well below the stress scenario (over 20%). The impact of the deal will be factored into the ECB’s September macro forecasts, it said.
Eurostat estimates that eurozone GDP grew by only 0.1% QoQ in Q2 (after +0.6% in Q1) and July inflation held at the 2% year-on-year target. Both factors reinforce the low growth scenario with persistently “anchored” inflation.
The market generally expects the ECB to keep the deposit rate at 2.00%, while continuing to assess the impact of tariffs and external conditions on growth prospects. (Meeting schedule on ECB website; effective rate is confirmed by official statistics and national regulators.)
The combination of factors – receding frontloading effect, new trade costs (12-16% effective average rate) and moderate PMIs – raises the probability of a stagnation scenario in H2: the economy is balanced around zero and growth momentum will depend on the sustainability of domestic demand and clarity on sectoral tariffs (pharma, semiconductors remain areas of uncertainty).