Euro Zone Industry and Trade Hit Hard in April

FRANKFURT (Reuters) – Euro zone industry and trade took major hits in April, likely reflecting U.S. tariff announcements, challenging the view of economists that the bloc is holding up well in the face of economic turmoil.

Industrial Production Declines

Industrial production fell by 2.4% on the month in April, exceeding the weak expectations for a 1.7% fall in a Reuters poll of economists, as every segment within industry suffered a contraction, according to data from Eurostat.

Trade Deficit Widens

Trade also suffered, with the surplus of the 20 nations sharing the euro dropping to just 9.9 billion euros, down from the previous month’s 37.3 billion euros.

The weak figures are not unexpected, as U.S. firms frontloaded purchases in February and March in anticipation of the April 2 tariff announcement. However, the April reversal is larger than many had anticipated, indicating downside risks to economic growth forecasts, already below 1% for the year.

Exports Decline

The euro zone’s exports to nations outside the bloc fell by 8.2% on the month, while broader EU figures showed a 9.7% drop, according to Eurostat. The EU’s total exports to the U.S., its biggest trading partner, decreased to 47.6 billion euros from 71.1 billion euros a month earlier, which was unusually high due to frontloading.

The drop was primarily driven by sharply lower chemicals exports, mainly related to pharmaceutical exports from Ireland. Irish pharmaceutical exports to the U.S. surged in the months leading up to the tariffs, pushing economic growth to exceptional levels.

Impact on Irish Industry

The figures clarify why Irish industry contracted by 15% on the month, leading euro zone production lower. The hit to industry was significant, erasing nearly all gains from the past year, with output in April just 0.8% higher than a year earlier, primarily from non-durable consumer goods showing any annualised increase.

Still, surveys conducted since the April turmoil indicate some modest optimism in manufacturing, suggesting that the sector is not heading back into recession, albeit its recovery will be shallow.