Germany’s economy is projected to stagnate in 2025. Blames Trump

Germany’s economy is projected to stagnate in 2025, primarily due to U.S. President Donald Trump’s tariffs and trade threats, according to the German government’s panel of independent economic advisers. The advisory panel, in its first forecast since Chancellor Friedrich Merz took office on May 6, 2025, predicts zero growth for the year, down from a previous estimate of 0.4% growth. This follows two consecutive years of economic contraction, with Germany’s GDP shrinking by 0.3% in 2023 and 0.2% in 2024. The panel attributes the stagnation to Trump’s tariff policies, which are increasing global economic uncertainty and particularly impacting Germany’s export-driven economy. The U.S. is Germany’s largest single trading partner, and tariffs on key exports like automobiles, steel, and aluminum are expected to reduce German exports to the U.S. by about 15%, as stated by acting Finance Minister Jörg Kukies. Despite the gloomy outlook, the panel sees potential for a 1% growth in 2026, driven by a massive investment package from Merz’s coalition aimed at modernizing infrastructure.

Germany – Economy

However, Germany’s economic challenges are compounded by high energy costs, weakening demand from China, and increasing competition from Asian goods. The new government under Merz has introduced reforms, including a €500 billion infrastructure fund and plans to reduce bureaucracy, digitize, and offer tax breaks to stimulate growth.

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