The European Central Bank published research charting a sharp rise in global trade policy uncertainty, peaking after a series of US tariff announcements in early 2025 and remaining historically high despite a May 2025 US-China trade truce and a US-EU framework agreement in July 2025. Model-based estimates link the 2025 increase in uncertainty to an average drag of around 0.3 percentage points on euro area real GDP growth relative to 2024, with risks persisting amid renewed US-China tensions and events related to Greenland in late 2025 and early 2026. The analysis highlights three main transmission channels: disruption to trade flows and supply chains, a “wait-and-see” pullback in firms’ investment and hiring, and weaker confidence as revenues and profitability are affected. Estimates are based on a Bayesian vector autoregression for 1999 Q1 to 2025 Q4 using both a text-based trade policy uncertainty index and an adjusted measure that strips out media attention, effective tariff rates, financial conditions and supply chain pressures, with the unadjusted index typically implying larger effects. Business investment is estimated to be about three times more affected than private consumption, and manufacturing more than business services. Despite the headwinds, euro area GDP growth in 2025 was 1.5% versus a March 2025 projection of 0.9%, which the research links to firms frontloading activity ahead of tariffs, supportive conditions during monetary policy normalisation alongside healthy private-sector balance sheets, and fiscal measures including Next Generation EU implementation, higher defence spending and targeted support.
European Central Bank 2026-03-30
European Central Bank research estimates trade policy uncertainty reduced euro area GDP growth by around 0.3 percentage points in 2025
The European Central Bank published research showing a sharp rise in global trade policy uncertainty in 2025, which it estimates reduced euro area real GDP growth by around 0.3 percentage points relative to 2024, with risks persisting amid renewed US-China tensions and events related to Greenland. Uncertainty mainly transmits via disrupted trade and supply chains, delayed investment and hiring, and weaker confidence, with business investment about three times more affected than private consumption. Despite these headwinds, euro area GDP growth in 2025 reached 1.5%, supported by frontloaded activity ahead of tariffs, favourable conditions during monetary policy normalisation, strong private-sector balance sheets and fiscal measures including Next Generation EU implementation and higher defence spending.