Germany's economy is likely to stagnate at best in 2025 after shrinking for two years and the impact of U.S. tariffs could weigh down an already unimpressive showing, leading think tanks forecast Thursday.
Germany has Europe's biggest economy and is the 27-nation European Union's most populous member. Five economic institutes said in a regular update that they expect minimal growth of 0.1% this year — down from the 0.8% they forecast in September. They predicted growth of 1.3% in 2026.
However, they pointed to uncertainty surrounding the Trump administration's trade policy. U.S. tariffs on aluminum, steel and vehicle imports are likely to reduce German economic growth this year and next by 0.1 percentage points each, according to their report.
The sweeping tariffs announced last week by President Donald Trump and then largely put on hold could double that hit to gross domestic product, the economists said. But the added that “the specific effects are difficult to quantify, as tariff rates have never been raised so sharply in the world’s current globalized economy.”
Germany's prospective new government, which hopes to take office next month after months of political drift in the country, aims to revitalize the economy. Friedrich Merz, the likely next chancellor, and his would-be allies presented their coalition agreement on Wednesday.
