The economy of the European Union showed signs of growth in the last quarter of 2025 and also compared to the previous year, but a weakening dollar looms as a possible threat for 2026.
The eurozone, the group of 21 countries that share the euro currency, recorded 0.3% growth in the last quarter of 2025, the same as in the third quarter. The growth was 1.3% when compared to the same quarter of 2024. The service sector drove the modest growth across the eurozone, while industry fell flat, with moderate growth at the end of 2025, and exports dropped. Along with lower inflation at 1.9% and higher salaries, the EU saw higher purchasing power to boost its economy.
The growth also showed resilience despite a turbulent year marred by tariffs and the threat of additional tariffs by US President Donald Trump. The EU cut a deal for a 15% tariffs earlier in 2025. However, in January, Trump’s aggressive stance on Greenland and the threat of new tariffs against European countries opposing his view of the Danish territory put a dent in the possibility of ratifying the trade deal between the US and the bloc.
In addition, another threat from the Atlantic Ocean may harm the EU in the coming months: a weaker dollar. Fears over the effects of Trump’s tariffs on the US economy, along with his threats to the autonomy of US Federal Reserve Chair Jerome Powell, have weighed on the country’s currency.
Thanks to this juncture, the euro has jumped 14.4% against the dollar in 2025. If this trend continues, the EU may suffer from weaker exports, as its products will be uncompetitive in crucial markets. Analysts are speculating that if the dollar remains this weak, the European Central Bank may decide to cut interest rates later in the year. The ECB will meet next on 5 February to decide on interest rates, but it is widely expected to confirm the current rate.
