(MENAFN) The European Commission has downgraded its economic growth projections for 2026, citing escalating threats from American trade barriers and global instability.

The revision follows a July trade agreement between Brussels and Washington that levies 15% duties on European automotive and general exports while requiring the bloc to purchase $750 billion in American oil and gas and commit $600 billion toward U.S. economic investments. The pact, finalized after prolonged negotiations marked by tariff ultimatums, has faced backlash over alleged one-sidedness and concerns about European industrial strength.

The commission's semi-annual economic assessment, published Monday, projects eurozone expansion at 1.2% in 2026—a decline from the previously anticipated 1.4%—while the wider EU economy is now expected to advance 1.4% rather than 1.5%. Officials attributed the reduction to American tariffs exceeding initial estimates and continued unpredictability regarding potential additional U.S. trade measures.

"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 stated. EU economy chief Valdis Dombrovskis reinforced this concern.

"Trade barriers have reached historic highs... The EU's highly open economy remains susceptible to ongoing trade restrictions," he told reporters, adding that US trade policy decisions and reactions by "key players like China" will likely "dampen global trade."

The commission issued additional warnings that "any further escalation of geopolitical tensions could intensify supply shocks," while climate-related disasters "pose major risks" to EU growth.

Near-term projections paint a brighter picture—driven primarily by exporters rushing shipments before tariff implementation. The eurozone growth estimate for 2025 has been elevated to 1.3% from May's 0.9% prediction, with broader EU growth upgraded to 1.4% from 1.1%. Yet officials cautioned the forecast "remains subject to high uncertainty," with the "balance of risks" "tilted to the downside."

Dombrovskis acknowledged that despite facing lower average duties compared to other American trading partners—granting the bloc "a relative advantage"—"uncertainty will remain a defining feature of the coming years." He called on Brussels to pursue "resolute action" to bolster economic performance through accelerated single market integration and regulatory streamlining.

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