Europe ran more than expected at the beginning of the year, but now the race has been uncertain. To say it, from Geneva, is Christine Lagarde, the president of the ECB: American duties and an uncertain global scenario are cooling the economy of the Eurozone, which risks slowing down already in the third quarter. From here the central nodes of the next monetary policy decisions (such as the main one of the next cutting cutting) and commercial relations with the United States start.
Lagarde, duties and end of the frontloading brake the third quarter
Speaking at the International Business Council of the World Economic Forum, Lagarde recalled that in the first months of 2025 the European economy had rectied well, mainly driven by accelerated exports in view of American rates, with a +0.6% GDP in the first quarter. He said:
The economy of the euro area proved to be resilient at the beginning of the year, in front of a global challenging context
But with the entry into force of the new duties this dream has broken. Now it’s time to wake up. Already in the second quarter there were signs of cooling, intended to consolidate themselves in the following months due to heavier rates than expected compared to the ECB estimates of June.
Lagarde explained that growth risks weakening further in the third quarter as the so -called “frontloading“, That is, the race to anticipate purchases before the tariff increases.
Euro area, work and consumption in support
In the Eurozone, alongside exports, they also positively engraved the spending of families and investments. The labor market remains stable: in June the unemployment was 6.2%, practically in line with the previous year, while the workforce continued to grow.
On the price front, the Eurostat data indicate that in July the inflation stopped at 2%, with minimal deviations between the member countries: in Italy the index dropped to 1.7% compared to 1.8% in June.
In September there will be news about interest rates
In September the ECB will update its estimates, including the impact of tariff policies and negotiations between Brussels and Washington. For Europe it will be a fundamental moment because we will also have news regarding interest rates. The new assessments will guide the next monetary policy moves.
Lagarde clarified that the rates set with the United States are slightly higher than in June hypotheses and will have to enter the next forecasts. The average duties on the US imports of European goods are now between 12% and 16%, just above the previous hypotheses.
After months of cuts that brought rates to 2%, the markets consider concrete the possibility of further loosening by the end of the year, a hypothesis made practicable by an inflation that remains in line with the objective of the ECB.
Commercial perspectives beyond the United States
Lagarde recognized that the United States remain a central partner, but has invited Europe to build more solid relationships also with other areas of the world, so as to expand the markets and reduce dependence on American choices. He added that, although not the worst scenario imagined in recent months, the agreement reached still leaves shadows on sensitive sectors such as pharmaceutical and semiconductor. This concept is also clear in his words:
Even if the US are, and will remain, an important commercial partner, Europe should strengthen its ties with other jurisdictions
Also, as reported by New York Timessectors like wine and alcohol risk staying out of the list of “zero-for-zero” products under discussion between Brussels and Washington, a node that weighs above all on Italian producers.
Duties, possible repercussions on US citizens
The eyes of the markets are focused on Jackson Hole’s symposium, in Wyoming, scheduled for Friday. It will be Jerome Powell’s last intervention as President of the Federal Reserve. Investors await his words to understand how the American central bank will move on the rates front.
Powell arrives at the appointment in a complex phase: Donald Trump insists on a new cut, while the duties risk weighing on consumers soon, especially starting from 2026.
