The larger-than-expected tariff imposed by US President Trump on the EU means the hit to the euro-zone economy will be larger than we had anticipated. For now, a euro-zone recession is still not our baseline forecast. But in Germany another contraction in GDP this year is a distinct possibility. And the risk that an escalation to a full-blown trade war or big drop in sentiment causes the outlook for the euro-zone economy to sour further has risen.
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