French growth weakened by the American trade war

On Wednesday, June 11, the Banque de France lowered its growth forecast for France in 2025 for the second time this year, to 0.6%, compared to 0.7% in March, due to the increase in American customs duties in a highly uncertain climate.

This sharp slowdown would come after a 1.1% increase in gross domestic product (GDP) in 2024. The government, for its part, is counting on 0.7%. A gradual recovery would follow, but less marked than previously anticipated: growth would reach 1% in 2026 (-0.2 points) and 1.2% in 2027 (-0.1 points).

"The French economy is now growing (...) less than [those of] our European neighbors, even if it is escaping recession," declared the governor of the Bank of France, François Villeroy de Galhau, in the newspaper Les Échos.

Overall, the increase in customs duties (-0.1 points) and especially the uncertainty it generates for consumers and businesses (-0.3 points) would cause the French economy to lose 0.4 points of GDP over the period 2025-2027.

"This unpredictability amplifies the French and European challenge of sluggish growth, which has been going on for too long," the governor stressed. It also affects "financial stability."

The United States has imposed a 10% tariff on most goods exported by the European Union, and a 25% tariff on steel and automobiles.

The Bank of France is making the central assumption that these customs duties would not be raised by Washington at the end of a 90-day negotiation period with Brussels ending on July 9, and in the absence of European reprisals.

In 2025, growth would be mainly supported by domestic demand, particularly public demand, and changes in stocks.

On the other hand, foreign trade, which had been its main driver in 2024, would suffer from customs duties, lower exports outside the eurozone and a strong euro.

In 2026 and 2027, household consumption would strengthen thanks to gains in purchasing power, with wages increasing more than prices.

Business and household investment, particularly in real estate, would observe the same trend in the wake of a drop in rates.

After 2.3% in 2024, the Banque de France now anticipates inflation of 1.0% in 2025 (-0.3 points), thanks to the fall in energy prices, according to the harmonized index of consumer prices (HICP).

It would then rise moderately to 1.4% in 2026 and 1.8% in 2027.