Europe's Factories Boosted by Tariff Frontrunning

Factory output in the eurozone partly rebounded from a tariff-induced slump in May, but trade is likely to remain a headwind even as manufacturers harbor hopes of better times on government pledges to increase defense and infrastructure spending.

- Joshua Kirby

Industrial production increased 1.7% from April across the 20 nations that make up the eurozone, according to figures released by the European Union's statistics agency on Tuesday. That was a faster rise than economists had expected, according to a poll conducted by The Wall Street Journal.

The increase reverses a sharp drop a month earlier, when the imposition of tariffs led to a fall in demand for European goods. Earlier in the year, factory output had surged as U.S. firms rushed to stock up ahead of the anticipated tariffs.

The rebound in May is a sign of resilience in Europe's manufacturing sector, which has suffered a series of blows over recent years. However, President Trump on Saturday threatened to raise the tariff for most European products to 30% from 10% on Aug. 1, which could lead to a fresh slowdown in factory activity.

The EU's top politician, Ursula von der Leyen, said the bloc would continue to work toward a deal with Washington, but that it is "ready to safeguard EU interests on the basis of proportionate counter-measures."

Ahead of the threatened tariffs, front-running of orders looks to have been particularly steep in the pharmaceutical sector. Factory output recorded a strong rebound in May in Ireland, where pharma titans like Allergan and Pfizer manufacture popular drugs from Botox to Viagra.