Investing.com - The German government has said it now expects to see its economy stagnate this year rather than expand by 0.3%, as uncertainty around global trade swirls threatens to weigh on activity and investment.
Germany -- Europe’s largest economy and long viewed as the powerhouse of the region -- has not grown over the past two years.
Elevated tariffs recently announced -- and then partially delayed -- by U.S. President Donald Trump have presented a further hurdle for the economy, which relies heavily on exports to foreign countries. Even before the trade turmoil, Germany was already grappling tepid overseas demand for its products and concerns over the competitiveness of its businesses.
In a statement cited by Reuters, Economy Minister Robert Habeck said the European Union and the U.S. must find a solution to an ongoing trade dispute, but argued that Europe should be ready to institute countertariffs if necessary. He added that U.S. trade policy has recently been "unpredictable."
"Given the German economy’s close integration into global supply chains and our high level of foreign trade openness, the new US protectionism could have significant direct and indirect effects on our economic growth," Habeck said.
In 2026, the German government now anticipates growth of 1%, below its January projection of 1.1%, with the economy seen picking up some pace under chancellor-in-waiting Friedrich Merz.
Exports are tipped to slide by 2.2% in 2025, but rise by 1.3% next year.
Earlier this month, Trump, in an apparent reaction to deep ructions in global stock and bond markets, postponed the imposition of steep tariffs on most countries for 90 days. Still, universal 10% levies remain in effect, as do duties on items like steel, aluminum and autos.
It is uncertain if the EU will be able to forge a new trade deal with the White House before the temporary halt is over. EU Trade Commissioner Maros Sefcovic has spoken with U.S. officials, while Trump and Italian Prime Minister Giorgia Meloni have met in person.
(Reuters contributed reporting.)