Germany’s economic outlook is bleak, with no growth in sight for 2025, as US President Donald Trump’s trade policies take a devastating toll on the country’s export-based sectors. The European Union and Germany are bracing for a significant impact from proposed tariffs.
The German economy has been on a downward trend for the past two years, with no growth in sight for 2025. The country’s economic forecast for 2026 has also been cut to one percent, down from 1.1%. This bleak outlook is largely attributed to the impact of US President Donald Trump‘s trade policies.
The European Union was negotiating with Washington to avoid a further 20% proposed US tariffs on goods from the bloc. However, the US tariffs are set to hit Germany’s major export-based sectors like automotive and pharmaceutical industries hard. The 10% duty on all imports and 25% levies on cars, aluminum, and steel will have a direct impact on the German economy, which is very export-oriented.
The United States imposed tariffs on various German imports, including steel and aluminum products, in response to the European Union's (EU) trade policies.
The tariffs, which range from 25% to 50%, were implemented under Section 232 of the US Trade Expansion Act of 1962.
Germany is one of the largest trading partners with the US, with bilateral trade exceeding $100 billion annually.
The tariffs have led to retaliatory measures by the EU, including tariffs on US goods like whiskey and denim.
The US trade policy of threatening and imposing tariffs has a significant impact on the German economy. According to outgoing Economy Minister Robert Habeck, ‘the US trade policy of threatening and imposing tariffs has a direct impact on the German economy, which is very export-oriented.‘ The US tariffs are expected to hit Germany’s car exports and imports hard.
Germany is also dealing with increasingly fierce competition in key industries such as automobiles and machinery. Habeck stated that ‘our big trade partners, China and the USA, and our neighbor, Russia, are causing us problems.‘ This increased competition will further put pressure on Germany’s economy.
However, not everyone shares the same pessimistic outlook. Bundesbank President Joachim Nagel warned of the possibility of a ‘slight recession‘ in 2025. In contrast, outgoing Economy Minister Habeck is more optimistic, stating that a new spending package worth many hundreds of billions of euros could help revive the economy under conservative Friedrich Merz.
Germany’s economic crisis has been ongoing for several years, with inflation soaring following the measures taken to contain the coronavirus pandemic, followed by the Russian invasion of Ukraine. The country’s economic outlook is bleak, and it remains to be seen how Germany will recover from this economic downturn.
Germany, Europe's largest economy, faced a severe economic crisis in the late 2000s.
The country's GDP contracted by 5.1% in 2009, with unemployment rates soaring to over 7%.
The crisis was triggered by a global financial downturn, which led to a sharp decline in exports and investments.
Germany's reliance on foreign trade and its export-driven economy made it particularly vulnerable.
However, the government implemented stimulus packages and monetary policies, helping the country recover steadily.
