Germany At Risk From US Tariffs, Bundesbank Warns

Germany is particularly vulnerable to US trade tariffs, which could curb economic growth for years and further strain an economy that has already experienced two consecutive years of contraction, Bundesbank President Joachim Nagel said, as reported by Balazs Koranyi for Reuters.

The Bundesbank expects Germany’s economy to grow by 0.2% in 2025 and 0.8% in 2026. I Photo: Deutsche Bundesbank

As Europe’s largest economy, Germany has been grappling with a deep industrial recession, driven in large part by subsidized Chinese output, which has been crowding out German products.

This challenge is compounded by soaring energy costs, which have further eroded Germany’s competitiveness.

Based on modeling projections that take into account tariff threats from US President Donald Trump, the Bundesbank concluded that while Germany would suffer, the US would also experience negative consequences that outweigh any potential benefits of trade barriers.

“Our strong export orientation makes us particularly vulnerable,” Nagel said in a speech.

“Economic output in 2027 would be almost 1.5 percentage points lower than forecast,” he added.

The Bundesbank expects Germany’s economy to grow by 0.2% in 2025 and 0.8% in 2026, meaning a 1.5 percentage point hit over three years could push the country into deeper economic contraction.

“Contrary to what the US government has suggested, the consequences of these tariffs for the United States are likely to be negative,” Nagel warned.

“The loss of purchasing power and higher costs for intermediate goods would outweigh any competitive advantages gained by US industry.”

Nagel also noted that if all tariffs hinted at by Trump before the election were implemented—and if they triggered retaliatory measures—global GDP growth would decline by 1.5 percentage points, while the US economy could suffer a 2-percentage point loss.

Similar concerns were echoed by Fabio Panetta, Italy’s central bank chief, who warned that Chinese firms shut out of the US market could seek new markets in Europe, further squeezing out European manufacturers.