Economic Slump Ahead for Germany − A Modest Recovery Forecasted by 2026
Specialists express concerns over overseas shipments
It's a gloomy outlook for Germany as economists across the board anticipate a significant economic downturn due to US tariffs. The latest reports from ZEW and Börsen-Zeitung offer a glimpse into the potential severity of this impending impact.
Alexandra Baude, Frankfurt
With US President Donald Trump swinging the tariff hammer at the start of April, there seems to be little concrete progress. Although deals have been made with the UK and China, and the EU has presented a list of goods for retaliatory tariffs, the extent and timing of these tariffs and counter-tariffs remain uncertain. As economists trim export forecasts and export expectations, as surveyed by Ifo, deteriorate, concerns about global trade and economic growth are reflected in the economic outlook of Börsen-Zeitung and the Centre for European Economic Research (ZEW).
The tariffs pose a direct threat to Germany's export-oriented economy, Europe's largest, and are lowering growth projections. The German government has downgraded its growth forecast for 2025 to zero, signifying the damage tariffs inflict on the export sector. Initially, the Bundesbank had projected modest growth of 0.2% for Germany in 2025 without the tariffs. However, with the tariffs, the risk of further economic contraction or even recession has dramatically increased.
Critics like the German Economy Minister and Bundesbank President argue that the tariffs are antiquated policies that inflict wide-ranging harm. They warn that tariffs threaten the stability and growth of German industry and escalate trade tensions, leading to retaliatory measures by the EU.
Assessments predict that the Eurozone's GDP could contract by approximately 0.3% due to the tariffs, with Germany possibly experiencing a contraction of around 0.4% of its GDP. Although the immediate impact might be more substantial, the overall reduction in EU growth (about 0.3 percentage points) is not expected to push the Eurozone into recession, given its prior forecasted growth rate of around 1.5% for 2025.
Beyond the short-term impact, there is potential disruption to supply chains, increased costs resulting from retaliatory tariffs, and uncertainty which can suppress investment and growth prospects.
In summary, US tariffs are poised to slow economic growth in Germany, potentially halting or even reversing its growth, and causing a moderate contraction in the broader Eurozone economy. While they disrupt critical export activities, they further fuel trade conflicts, posing downside risks to growth. However, the Eurozone is projected to maintain positive growth, albeit at a lower rate than initially forecasted.
[1] Studies and economic models estimate that the Eurozone GDP could contract by approximately 0.3% as a result of the tariffs, with Germany likely to experience a contraction around 0.4% of GDP.[2] Although the short-term impact of the tariffs may be larger, the overall reduction in EU growth (about 0.3 percentage points) is unlikely to push the Eurozone into recession.[3] Critics argue that the tariffs pose a direct threat to Germany's export-oriented economy, Europe's largest, and are lowering growth projections. They warn that the tariffs threaten the stability and growth of German industry and escalate trade tensions.
The tariffs imposed by the US President are directly threatening Germany's export-oriented economy, lowering growth projections and potentially causing a contraction in the nation's GDP. Consequently, finance experts foresee difficulties for German businesses in the near future due to these trade tensions.
