Germany’s 2025 Economic Outlook Dims Due to Trade Policies

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    BERLIN — On Thursday, the German government adjusted its forecast for the nation’s economic performance, predicting stagnation for the current year in Europe’s largest economy. This revision comes in the wake of tariffs and trade threats issued by U.S. President Donald Trump, following a period marked by political uncertainty.

    Outgoing Economy Minister Robert Habeck announced a downward revision of the economic projections for 2025, reducing it to zero from an earlier estimate of 0.3% growth provided at the end of January. The expectation for next year’s economic growth has also been slightly reduced to 1%, compared to the previous 1.1% predicted three months prior.

    “The primary reason for these changes is the impact of Donald Trump’s trade policies on Germany,” Habeck stated during a press conference in Berlin. He emphasized that Germany has been operating without a parliamentary majority-backed government since early November, and the new government, due to February elections, has yet to be established.

    For the past five years, Germany has not witnessed significant economic advancement. Historically, the country has led global trade in sectors such as industrial machinery and luxury automobiles through a robust export strategy. However, it now faces heightened competition from Chinese enterprises among other challenges, culminating in economic contractions over the past two years.

    Trump’s tariffs have intensified the uncertainties surrounding German exports. The United States emerged as Germany’s primary trading partner last year, a position China held since 2015. This shift was prompted by a reduction in exports to the Asian nation.

    Germany’s parliament has set May 6 for a session to elect Friedrich Merz as the nation’s new leader, contingent upon all political parties involved in the proposed government endorsing a coalition agreement finalized earlier this month.

    Last month, the potential governing alliance took proactive measures by pushing through legislation to accommodate increased defense expenditures, partially through relaxed borrowing regulations, while also establishing an extensive infrastructural fund aimed at invigorating the economy.