The EU on Thursday slashed its growth forecast for the eurozone in 2018, warning that the rising trade tensions with the United States were hitting the economy. The European Commission, the EU's executive arm, said the 19-country single currency bloc would expand by 2.1 percent in 2018, lower than the 2.3 percent forecast just weeks ago in early May.
“Our forecast is for a continued expansion in 2018 and 2019, although a further escalation of protectionist measures is a clear downside risk," said EU Economic Affairs Commissioner Pierre Moscovici in a statement. "Trade wars produce no winners, only casualties," he added.
The commission added that the economy in the eurozone would expand by 2.0 percent in 2019, the same forecast as in May.
The worry about the European economy stems from the ongoing trade dispute with the administration of US President Donald Trump, which has now threatened to impose tariffs on European auto imports, with German auto giants the intended target.
If confirmed, the policy would be one of the most aggressive transatlantic blows since the Great Depression and risks bitterly splitting the allies amid divisions over the Iran nuclear deal and the Paris climate accord.