The Eurozone’s battle against inflation may be entering a new and more turbulent phase, as fresh tariffs imposed by the United States risk reversing recent monetary gains, according to Professor Joe Nellis, economic adviser at MHA, the accountancy and advisory firm.

A fragile calm

Headline inflation in the Eurozone stood at 2% in July, marking the sixth consecutive month in which the annual rate has remained at or below 2.3%. This period of relative price stability, particularly when compared to the UK — where inflation has not dipped below 2.3% since October 2024 — had led many to believe that the worst of the crisis was over.

A strengthening euro throughout 2025, coupled with falling energy prices, has helped contain inflationary pressures, making imports less costly and improving the bloc’s purchasing power. This has enabled the European Central Bank to cut interest rates steadily over the past year, bringing the deposit rate down to 2% in an effort to stimulate growth.

However, economic momentum remains elusive. GDP rose by just 0.1% in the second quarter, raising doubts about whether monetary easing alone can reignite the Eurozone’s sluggish economy.

Rising storm clouds

That fragile recovery is now under threat. A recently agreed trade deal between the European Commission and Washington will see a 15% tariff imposed on EU exports to the US — a compromise reached after averting a more severe 30% levy. Nonetheless, the move is expected to exert fresh upward pressure on prices across the bloc.

German Chancellor Friedrich Merz has already warned of the risk of renewed inflation, suggesting that consumer prices could spike in response to higher export costs being passed back through the supply chain. The European Central Bank, which had been expected to consider further rate cuts in the coming months, is now likely to adopt a more cautious stance.

“The ECB has played its hand skilfully to date, balancing inflation control with a loosening of monetary conditions to support growth,” said Professor Nellis. “But the global environment has shifted. With trade tensions mounting, and geopolitical risks spilling into economic policymaking, the Bank may find its recent progress rapidly undone.”

He added: “What looked like a path to a soft landing for the Eurozone could yet give way to fresh turbulence. The economic storm clouds are gathering once more.”