Manufacturing activity in the euro area rebounded in early 2025, while services activity slowed, marking a reversal of the trends observed in the previous two years. This box analyses the role of frontloading effects and trade policy uncertainty in driving recent production dynamics. It argues that manufacturing benefited temporarily from frontloading ahead of US tariff measures, while services were more directly affected by rising trade policy uncertainty. In particular, hard data reveal that manufacturing subsectors with higher exposure to the United States (e.g. pharmaceuticals) exhibited larger fluctuations around the April tariff announcements. Moreover, survey data indicate that business services, which are closely linked to business investment, have been more sensitive to uncertainty than consumer services. Looking ahead, if trade policy uncertainty were to remain high, it could continue to weigh on services and more visibly affect manufacturing as frontloading effects fade, yet the recent EU US trade agreement is expected to reduce uncertainty.
Nothing contributes so much to the prosperity and happiness of a country as high profits