(MENAFN) The European Commission has reduced its economic growth forecast for 2026, citing rising US tariffs and ongoing geopolitical tensions as key risks to the bloc’s economy.

In July, Brussels reached a trade agreement with Washington that imposed a 15% tariff on EU car exports and most other goods, while committing the EU to purchase $750 billion in US oil and gas and invest $600 billion in the American economy. The deal, finalized after months of high-stakes negotiations and tariff threats, has faced criticism for potentially undermining EU competitiveness.

In its biannual economic outlook released Monday, the Commission projected eurozone growth of 1.2% next year, down from a previous 1.4%, while the broader EU is expected to expand by 1.4%, rather than 1.5%. The downgrade reflects not only elevated US tariffs but also uncertainty over possible further 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 reiterated the warning, noting, “Trade barriers have reached historic highs… The EU’s highly open economy remains susceptible to ongoing trade restrictions.” He added that decisions by the US and responses from “key players like China” are likely to “dampen global trade.”

The Commission further cautioned that “any further escalation of geopolitical tensions could intensify supply shocks,” while climate-related disasters “pose major risks” to EU growth.

For 2025, the outlook was revised upward, largely due to a surge in exports ahead of anticipated tariff increases. The eurozone is now expected to grow by 1.3%, up from 0.9% in May, and the wider EU by 1.4%, up from 1.1%. Nevertheless, the Commission emphasized that the forecast “remains subject to high uncertainty,” with the “balance of risks” “tilted to the downside.”

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