Eurozone Economy Defies Tariffs & Turmoil
Eurozone gross domestic product grew more than expected quarter over quarter in the fourth quarter of 2025. GDP growth of 0.3% against an expected 0.2% consensus prediction lifted annual GDP growth to 1.4% year over year after a 0.8% year over year GDP growth performance in 2024.
The data available from EU member states so far suggest that trade among European Union member states is providing some compensation to offset the effects of tariffs placed by the U.S. on exports from EU countries. A low unemployment rate and continuous growth in real income have been supportive of household consumption, which, along with government consumption has kept GDP growth above forecast expectations for the euro area.
Spain continues to lead among the largest member states as economic growth reaccelerated to 0.8% q/q. The Netherlands posted another 0.5% q/q, while growth in Germany and Italy picked up to 0.3% q/q. In France, growth slowed to 0.2% after a very strong third quarter.
Forecast
Individual forecasts differ in their economic outlook for Gross Domestic Product in the EU economy. Household consumption will likely remain a key driver in the EU economy. Rabobank does not anticipate a significant increase in the unemployment rate that would chill household spending. Inflation in both food and energy prices has abated which should support consumer confidence.
Defense spending could become a key driver of the growth rate over the next few years. Commitments by multiple EU member states to increase defense spending—Germany in particular—could help to offset the effects of tariffs on manufacturing sectors. Gains could take time to fully materialize due to production capacity, but output in defense-related sectors has already been on the rise in France and Germany.
Overall, the European Union economy continues to show resilience to at least offset the negative effects of tariffs and other geopolitical factors.
Report Authors
Maartje Wijffelaars
Senior economist Eurozone
Elwin de Groot
Head of Macro Strategy
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