The European Commission expects the 20-country single currency area to grow by 1.2% in 2026, down from a previous forecast of 1.4%.

The bloc’s executive said Europe’s “highly open” economy remained “susceptible to ongoing trade restrictions” but noted that US trade deals with partners including the European Union “alleviated some of the uncertainties”.

“Persistent trade policy uncertainty continues to weigh on economic activity, with tariffs and non-tariff restrictions potentially constraining EU growth more than expected,” the commission said in a statement.

For the entire 27-country EU, Brussels expects growth of 1.4% in 2026, slightly lower than the 1.5% predicted in May.

EU economic chief Valdis Dombrovskis appeared upbeat despite the uncertainty.

“Even in an adverse environment, the EU’s economy has continued to grow,” Dombrovskis said in a statement.

Brussels also forecasts eurozone inflation to hit 1.9% in 2026, up from the previous prediction of 1.7% for next year.

The commission said inflation in the single currency area is expected to reach 2.1% in 2025, within touching distance of the European Central Bank’s 2% target.

Although Brussels said food and services price rises are slowing, this was “counterbalanced by rising energy inflation”.