Europe and the world are faring better than expected despite tariff pressure

The euro-area economy surprised economists in the third quarter, expanding by 0.3% compared with the previous three months — above the preliminary 0.2% estimate. That uptick hints at a broader global trend: despite rising tariff tensions, economies around the world have shown unexpected resilience.

According to OECD, this resilience owes much to a combination of strong investment — notably in artificial-intelligence technologies — along with supportive fiscal and monetary policies.

Why the economy didn’t falter as badly as feared

• Many firms appear to have front-loaded purchases ahead of tariff increases, cushioning the immediate shock. This helped dampen short-term disruption in trade flows.
• Lower energy prices and a relatively stronger euro in some periods also softened inflationary pressure and reduced costs for consumers and businesses.
• Meanwhile, fiscal stimulus in several European countries — including increased public spending and government support plans — played a stabilizing role, preserving household demand and investment capacity.

The caveats: risks remain

Despite these positive signs, multiple analysts warn the situation could deteriorate if trade tensions escalate further. For example:

• Before the recent rebound, many institutions had projected a sharp slowdown for the eurozone.
• Higher tariffs — especially if extended or met with retaliation — remain a source of uncertainty that could hurt key export sectors such as manufacturing, autos, and pharmaceuticals.
• Sluggish global trade growth and weak demand from major economies threaten to undermine any gains unless offset by strong domestic investment or a rebound in consumer spending.

What this means going forward

The recent data suggest that, at least for now, the global economy — including Europe — has avoided the worst-case scenarios of a trade-induced recession. But long-term stability will likely depend on several factors: whether AI investments continue apace, if fiscal support around the world stays robust, and whether policymakers can navigate trade policy without triggering further retaliation and uncertainty.