Eurozone Business Sentiment Showed Signs of Recovery Before U.S. Tariff Shock

Firms across the euro area were beginning to report stronger business momentum in the days leading up to the Trump administration’s early April tariff announcement, according to a European Central Bank (ECB) survey released Tuesday. The findings, based on responses gathered from 79 major non-financial companies, suggested that a nascent recovery in the industrial sector was underway—though that outlook may now be overshadowed by the subsequent financial turmoil triggered by the new U.S. trade measures.

According to the ECB’s corporate telephone survey conducted between March 26 and April 2, businesses noted that although uncertainty remained high, they were observing “signs of recovering demand for machinery and equipment,” along with early indications that “construction activity was turning a corner.”

However, these more optimistic assessments preceded the economic jolt caused by the U.S. administration’s tariff announcements, which rattled global markets and intensified trade tensions. The ECB itself has since cautioned that the risks to growth have become more pronounced. “Downside risks to economic growth have increased significantly,” the central bank warned last week, adding that the trade war “will lower economic growth.”

Despite lingering caution, many eurozone companies remained relatively upbeat prior to the announcement, with even employment prospects seeing mild improvement. Firms told the ECB that the employment outlook was “improving slightly,” although they were still primarily focused on boosting “efficiency and not hiring more workers.”

During the survey window, companies also indicated that they had not yet been prompted to reconsider major investment decisions. “Firms said they were taking a wait-and-see stance about tariffs and were not yet reassessing major investments,” the ECB noted in its summary of the findings.

Though the mood may have since shifted, the ECB’s survey captured a fleeting moment of guarded optimism within the eurozone economy—one that may now face renewed headwinds in the wake of escalating global trade tensions.

By fLEXI tEAM