Trade policy uncertainty weakens the short-term outlook for European cities

We have downgraded European GDP growth for both 2025 and 2026, reflecting our expectations that recent tariff announcements and ongoing US-China trade policy tensions will weigh on demand and investment within the region. But this is not just a national story. The challenging macroeconomic environment will have significant implications for cities and regions.

What you will learn:

• Europe’s major city economies, on average, are fairly well-insulated. However, within this group there are still some notable variations.
• Some CEE cities, including Bratislava, suffer sharper downgrades due to their reliance on manufacturing subsectors, such as automotive production.
• While prospects for Copenhagen and Dublin have dimmed considerably due to the likely imposition of US tariffs on pharmaceuticals, a sector that is very important to both cities.
• The outcomes for Europe’s largest economy―Germany―are mixed. The recently passed fiscal stimulus package will provide a boost for Berlin’s GDP over the short and medium term. But the more industrial-based cities of Munich and Hamburg will see slight downgrades.

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