Tariffs Impact on German Exports and Economic Growth in 2025
Enhanced product shipments exceeding forecasts, propelled by Trump's fresh tariffs, stimulate growth beyond predictions. - Growth in exports predicted due to Trump tariffs: economy shows unexpected strength
German exports and economic growth could be influenced significantly by the tariffs proposed by US President Donald Trump in 2025. Key aspects of this potential impact are outlined below.
Exports in Germany, a nation heavily dependent on this sector, may suffer a severe blow, specifically in industries such as industrial machinery and luxury car production, which represent significant trading portions in the US market. These sectors face the risk of reduced demand and increased costs due to the proposed tariffs.
The looming threat of a 50% tariff on EU goods imported to the US carries a substantial risk for German exporters, with the potential for increased uncertainty and declining economic growth.
Economic projections indicate that Germany's economy is forecasted to stagnate in 2025, largely due to the anticipated effects of Trump's tariff policies. This stagnation follows a period of sluggish growth and recent GDP contraction. There remains an element of optimism for future growth, however, with infrastructure modernization and European trade agreements earmarked as potential catalysts for an economic uptick in 2026.
In response to the tariff threat, the EU has considered retaliatory measures, which could intensify trade complications and worsen the economic challenges. Additionally, Germany's government has proposed investment packages and policy reforms aimed at mitigating tariff impacts and promoting recovery.
Data from the Federal Statistical Office shows that, during the first quarter of 2025, the manufacturing sector, including the chemical industry, mechanical engineering, and automotive industry, recovered from previous quarter declines. Exports increased by 3.2% compared to the fourth quarter of 2024, with strong growth in pharmaceutical and automotive products. This uptick may be attributed to anticipation of high tariffs prior to a proposed April implementation, as US importers ramped up purchases to avoid the increased costs.
ING Bank analyst Carsten Brzeski has suggested that these tariff developments will influence the German economy. He highlighted that, after a reduction in many surcharges for a 90-day period, a 10% base tariff still applies globally, including for EU countries. This reduction saw tariffs rise above January levels, and the uncertainty caused remains a concern for future economic growth.
The German Savings Banks Association does not yet predict an economic recovery, stating that the economy is still within a lingering weakness phase. This downturn is expected to persist during the spring and summer, with possible economic activity only anticipated late in the year. However, timely economic policy impulses from the federal government could spur growth toward the end of 2025.
Measures such as improved company depreciation conditions and the implementation of the new federal government's financial package have the potential to provide noticeable economic stimuli in 2026, according to BVR chief economist Andreas Bley. He projects a balanced budget for economic growth in 2025.
- The major employment sectors in Germany, such as the industrial machinery and luxury car production industries, could face job losses due to reduced demand and increased costs as a result of the proposed tariffs.
- The finance industry in Germany might experience instability if these tariffs lead to a decline in economic growth, making it challenging for businesses to secure loans and investments.
- In response to the tariff threat, the German government has proposed employment policy reforms aimed at aiding recovery and mitigating tariff impacts on various industries.
