Why The New Growth Chapter For EU Manufacturing Is Set To Be A Slow Burn

2025-05-01 14:01:00 ET

Summary

• US protectionist policies have sabotaged new prospects of growth for European manufacturing.
• German investment plans and EU-wide increases in defence spending could provide a gradual boost.
• We think significant growth is probably going to be a story for 2026.

By Edse Dantuma

Growth phase postponed as trade uncertainty hits new peak

Just as a new growth phase seemed to be inching closer, European manufacturing is now facing a new era of trade turmoil. A longstanding decline in industrial production across the region emerged in the first quarter of 2023 – but just as we've started to see it bottoming out, US President Donald Trump's tariffs have taken the sector by storm.

Rising levels of trade uncertainty are now intensifying the pressure on both low confidence levels and a limited willingness toward investment, and this is bad news for goods-producing sectors like manufacturing. 20% reciprocal tariffs have been postponed for 90 days, but 25% tariffs on steel, aluminium, cars and auto parts remain in place for now. Most other EU-manufactured goods are now subject to a 10% tariff....

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