The European Commission has cut its growth forecast for the eurozone this year, followed by uncertainty caused by Donald Trump’s tariff war.

The commission said the impact of tariffs requires a "substantial downgrade" to the expected growth of the 20-member euro zone this year, compared with previous forecasts, which was 0.9% in November, or 1.3%.

The committee's spring forecast also lowers the extent of eurozone recovery in 2026 to 1.4% from November's forecast.

Economic and Economic Commissioner Valdis Dombrovskis said Trump imposed a 20% tariff on EU imports in April, and the subsequent 90-day suspension caused some uncertainty, "not seen since the darkest days of the Covid-19-19 pandemic."

He said the European economy remained resilient and the job market was solid, and the commission predicted that the unemployment rate would drop to a record 5.7% next year.

Germany is expected to be the biggest hurdle to growth in 2025, although the commission said zero growth in 2025 and 1.1% in 2026 will mean that the EU's largest economy will avoid a third consecutive year of contraction.

After Russia's invasion of Ukraine, Germany's economy suffered from a lack of public investment and high energy costs. A sharp slowdown in China's exports has hit exports. German auto and industrial products lost their sales prospects after rising U.S. tariffs have led to hopes of recovery this year.

Dombrovskis said that while Trump is suffering from a reduction in higher tariffs after rating agency Moody deprived of its high-profile Triple-A credit rating last week, the risk of further deterioration in Europe "inclined to fall."

Rating agencies’ S&P and Fitch have lowered U.S. downgrades, citing higher tariffs and plans for White House to cut taxes and increase expected defense spending in the fall have been affected.

“Moody’s catches up with other rating agencies, but downgrades can be a reminder of the growing number of fiscal challenges[in the U.S.],” said Hauke ​​Siemssen, rate strategist at Commerzbank.

The impact of U.S. tariffs are expected to be discussed later this week at the G7 meeting of Treasury Secretary and Central Bank governors in Banff, Canada, although no agreement is expected to be reached on the next step.

Belgian central bank governor Pierre Wunsch told the Financial Times that additional pressure on the eurozone economy could force the European Central Bank to lower interest rates to 2%.

On Monday, U.S. Treasury bonds rose to 4.54%. The equivalent bonds sold by the German government attracted 10-year Italian bonds with yields of 2.60% and 3.63%.

The European Commission sold three-year bonds on Monday at an average yield or interest rate of 2.31%, but emphasized the EU's safe haven situation, which sold three-year bonds despite the downgrade to growth. The trading yield on the five-year UK bond on Monday was 4.17%.

S&P Global said its survey of UK consumers found they were nervous about spending due to “limited cash.” Its regular consumer sentiment survey of 1,500 households, tracking their financial well-being, job prospects, savings and debt, increased from 44.5 in April to 45.2 in May, when the numbers under 50 indicated a contraction.