European Commission Upgrades Economic Growth Outlook for Spain and EU Amid Trade Tensions

The European Commission has revised upward its economic growth forecasts for Spain and the broader European Union for 2025 and 2026 despite ongoing trade tensions with the United States. The EU's GDP is now expected to expand by 1.4% in both 2025 and 2026, an improvement from earlier estimates. The Eurozone's growth predictions have also been increased to 1.3% for 2025 and 1.2% for 2026, surpassing prior forecasts.

Spain is expected to lead EU growth with a robust 2.9% expansion this year, supported by a resilient labor market bolstered by migration flows. The Spanish unemployment rate is projected to decline below 10% by 2026. Across the EU, unemployment rates remain around 6%, with projections indicating a further decrease to 5.8% by 2027.

This improved outlook comes despite the imposition of a 15% general tariff on EU exports to the US—the highest in nearly a century—though this rate remains comparatively lower than tariffs faced by other US trading partners. The trade war scenario has introduced risks, but a recent agreement between Washington and Brussels has reduced uncertainty. The European Commission warned that an open trade conflict with the US could be devastating but remains cautiously optimistic due to the resilient labor market, rising purchasing power, and favorable financing conditions.

The recovery fund established by the EU and supportive fiscal and monetary policies have played a critical role in maintaining investment and demand. Inflation rates in the Eurozone are stabilizing around 2%, aligning with European Central Bank targets and facilitating favorable credit conditions. While public deficits and debt are expected to rise slightly due to increased defense spending, particularly among member states, the recovery plan is anticipated to cushion these effects.

Commission President Ursula von der Leyen and other officials have emphasized the importance of mitigating external risks related to trade and geopolitical uncertainties. The gradual return of inflation to target levels and ongoing job creation further underpin the positive economic forecasts.

Overall, the improved projections reflect a balance of cautious optimism amid complex global trade dynamics and domestic economic strengths within Spain and across the European Union.