Media reports Germany encountering third year of no growth

(MENAFN) Germany is expected to experience zero economic growth for the third year in a row, according to a new government forecast cited by Handelsblatt. The continued stagnation is largely attributed to the recent spike in U.S. tariffs and growing uncertainty surrounding American trade policy under President Donald Trump.

Earlier this month, the U.S. imposed a 20% tariff on all EU goods and a 25% levy on steel, aluminum, and automotive imports, citing unfair trade practices. Although President Trump has temporarily paused most new tariffs for 90 days to allow for negotiations with the EU, a 10% baseline tariff and the targeted 25% duties remain in effect.

Chancellor Olaf Scholz’s outgoing administration has now revised its 2025 GDP projection for Germany to 0%, down from 0.3% earlier this year. If realized, it would mark the first time Europe’s largest economy has recorded zero or negative growth for three consecutive years, following contractions in both 2023 and 2024. A slight rebound is anticipated in 2026, with growth now forecast at 0.9%, lower than the previously projected 1.1%.

Trade with the U.S.—Germany’s top export partner last year—has been particularly affected by the tariffs. Uncertainty over the trade outlook has led many German firms to delay investment decisions, further dampening growth prospects. If the full 20% tariff package is implemented, economists warn that the economy could shrink by 0.3%.

While sluggish business activity has deepened the economic gloom, there may be some relief ahead. The German government recently approved a €500 billion ($570 billion) infrastructure fund and relaxed the country’s debt brake. Additionally, incoming Chancellor Friedrich Merz, who takes office in May, has pledged to restore Germany’s economic competitiveness.

Negotiations between Brussels and Washington remain ongoing. European Commission President Ursula von der Leyen proposed a mutual removal of tariffs on industrial goods, but Trump rejected the offer, demanding that the EU commit to purchasing $350 billion in American energy as a condition for tariff relief.

Despite the tensions, Trump indicated during a meeting with Italian Prime Minister Giorgia Meloni that a deal with the EU is inevitable, though he emphasized there is "no rush" to finalize it.

The bleak outlook aligns with a recent IMF forecast, which also downgraded Germany’s 2025 growth to 0.0%, predicting it will be the only G7 economy not to grow this year—largely due to its reliance on exports in an increasingly volatile global trade environment.

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