Euro zone industry, trade take big hits in April amid tariff turmoil

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

Industrial production fell by 2.4% on the month in April, more than the already-weak expectations for a 1.7% fall in a Reuters poll of economists, as every segment within industry suffered a contraction, data from Eurostat showed on Friday.

Trade also suffered, with the surplus of the 20 nations sharing the euro falling to just 9.9 billion euros compared with 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.

But the April reversal is larger than many had anticipated, indicating downside risks to economic growth forecasts, which are already below 1% for the year.

The euro zone's exports to nations outside the bloc fell by 8.2% on the month, while figures for the broader EU showed a 9.7% drop, Eurostat said.

The EU's total exports to the U.S., its biggest trading partner, totalled 47.6 billion euros in the month, well down on the 71.1 billion reported a month earlier, which included the frontloading and was itself considered unusually high.

The drop was mainly driven by sharply lower chemicals exports, likely relating mostly to pharmaceutical exports from Ireland, which hosts a number of international firms that are located there for tax reasons.

Irish pharmaceutical exports to the U.S. surged in the months leading up to the tariffs, pushing up economic growth to exceptional levels.

The figures also explain why Irish industry contracted by 15% on the month, leading euro zone production lower.

The hit to industry was so large that it erased nearly all gains from the past year, and output in April was just 0.8% higher than a year earlier, with only 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 going back into recession even if its recovery will be shallow.

(Reporting by Balazs Koranyi; Editing by Hugh Lawson)

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