German economy to grow 0.1 pc in 2025, dragged by US tariffs
BERLIN: Germany is facing a stronger-than-expected drag from US tariff hikes, several leading research institutes said, and they now project the economy to grow by only 0.1% in 2025, 0.1 percentage points lower than their autumn forecast.
According to the ifo Institute’s Economic Forecast Winter 2025 and the Kiel Institute for the World Economy’s Winter Forecast, the downgrade reflects a sharper drop in exports to the United States following tariff increases and the limited impact of Berlin’s fiscal measures, including a multi-billion-euro infrastructure fund unveiled earlier this year.
Germany’s overall exports are forecast to fall 0.2% in 2025, with shipments to the United States recording a particularly steep decline, the Kiel Institute said, citing tariff-driven trade disputes and the erosion of Germany’s competitiveness.
Domestically, the economy is in the midst of a far-reaching structural transformation. The federal government’s fiscal package, comprising the infrastructure fund and a significant rise in defence spending, had initially buoyed business sentiment, but confidence has faded again towards year-end as the promised stimulus has yet to materialise.
“Economic policy decisions taken so far are likely to provide only a brief lift to activity and offer no impetus for higher potential output or faster potential growth,” the ifo Institute said, adding that higher US tariffs are further weighing on German industry.
Following a reassessment of output prospects, ifo now expects Europe’s largest economy to grow 0.8% in 2026 and 1.1% in 2027, with both figures lowered by 0.5 percentage points from its autumn forecast.
Since their spring projections, the institutes have repeatedly cut growth estimates in response to US tariff measures. With the export sector under heavy strain, quarterly gross domestic product contracted by 0.2% in the second quarter after a 0.3% rise at the start of the year, before stagnating in the third.
“Even for the end of the year, no noticeable turnaround is in sight,” the Leibniz Institute for Economic Research said.
By RSS/Xinhua
