(Bloomberg) -- France’s economic outlook has deteriorated as the anticipated impact of a global trade war compounds an already slow start to the year, the country’s central bank said.
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The Bank of France cut its 2025 growth forecast to 0.7% on Wednesday from 0.9% in December, heralding the weakest annual expansion since the Covid pandemic. It also trimmed its prediction for 2026 to 1.2% from 1.3%.
The institution lowered its estimate for global demand and integrated heightened doubts linked to US President Donald Trump’s escalating tariff threats. It also said the French economy was more sluggish than expected in recent months, with a political crisis over the budget undermining business confidence.
“The key word that sums up the situation is uncertainty,” Bank of France Chief Economist Olivier Garnier said. “In December, uncertainty was mainly about the national situation as we were in peak uncertainty on the French budget. Today, uncertainty is firstly on an international level linked to what is happening with US tariffs.”
The gloomier forecasts come as Trump attempts to upend the US economic model with punitive measures against friends and foes alike. His 25% tariffs on steel and aluminum imports came into force Wednesday, triggering concern across export-reliant Asia and immediate reprisals from the European Union and Canada.
Worse is likely still to come for trading partners such as France as the president threatens broader levies on the EU.
The Bank of France’s estimates only account for the direct fallout from known moves at the time of forecasting. It calculated indirect effects due to uncertainty from threats against Mexico, Canada and the EU.
“There is an indisputable impact if measures are indeed applied, but the size will depend on targeting and duration,” Garnier said. “As we’ve seen, sometimes measures are taken then withdrawn within 24 hours.”
The Bank of France said there are numerous risks around its forecasts, notably from trade tensions and how the EU may respond. Earlier Wednesday, the bloc already announced duties on as much as €26 billion ($28.3 billion) worth of American goods in response to US metals tariffs.
Still, the central bank said there are potential upside risks for France, including from additional defense spending proposed by the European Commission and Germany.