Customs disagreement impedes export surplus recovery progress
Germany's Troubles with the US: An Up-Close Look at Trade Woes and Industrial Struggles
A rough start to Q2 for Germany, courtesy of the heated US trade dispute. The Bundesbank has lowered its economic forecast, expecting Germany to endure its third consecutive year without growth by 2025. But some economists catch glimpses of hope for a turnaround.
In April, German exporters, especially those dealing with the US, experienced a substantial slowdown, according to preliminary figures from the Federal Statistical Office. Despite a surge in German exports to the US shortly after Trump announced his XXL tariff package, the figures plummeted to their lowest since October 2024 at €13 billion. This was a 6.3% drop compared to April 2024.
Negotiated Solutions with the US are Urgently Needed
"The impact of US trade policy has finally reached us," commented Dirk Jandura, president of the Federal Association of Wholesale, Foreign Trade, and Services (BGA). "The EU must swiftly engage in constructive talks with our most important trading partner to find solutions. We can't do without the US."
Just a few days ago, Washington escalated the situation once more: Trump ordered a doubling of tariffs on steel and aluminum imports into the US, increasing them from 25 to 50%.
Positive Signals for a Reversal in Trend
Despite the negative trends, some experts spot positive signals hinting at an upturn. In April, despite a decline in overall exports and production, analyst Sebastian Dullien, of the Institute for Macroeconomics and Economic Research at the Hans-Boeckler Foundation, noted a stabilizing trend in the industrial sector, hinting at a potential turning point.
Commerzbank analyst Ralph Solveen agrees, pointing to higher order numbers and the rise in the Ifo business climate index as signs of an upcoming revival. However, he cautions that higher US tariffs and structural issues in Germany's economy could hinder a strong recovery.
The Bundesbank and the Delayed Recovery
In the first quarter, fears of higher tariffs briefly sparked economic growth, with a 0.4% rise from the previous quarter, double the initial estimate from the Federal Statistical Office. Nevertheless, the hoped-for recovery in 2025 will not materialize, according to the Bundesbank.
"New US tariffs and uncertainty over future US policy initially dampen economic growth," said Bundesbank President Joachim Nagel. "This hits Germany's industry at a time when it was beginning to stabilize after a long period of weakness."
Tough Times Ahead for "Made in Germany"
The outlook remains challenging for Germany's exporters, with the Bundesbank predicting a significant drop in exports this year due to US trade policy, with little improvement expected by 2026. What's more, the euro's sharp appreciation against the dollar, triggered by the US's erratic policy, has weakened the competitiveness of Germany's export industry.
"German companies abroad are facing deteriorating conditions and growing uncertainty in almost all world regions," confirmed DIHK's head of foreign trade, Volker Treier.
Economic Growth Shifts to the Future with Infrastructure Investments
The recovery of the German economy is now expected to extend into the coming years, with state investments in defence and infrastructure expected to provide a boost. For 2026, the Bundesbank expects a real GDP growth of 0.7%, and 1.2% for 2027. However, the unpredictable zigzag course of US President Trump remains the biggest uncertainty factor.
In the midst of the announced increase in US tariffs on steel and aluminum imports, Dirk Jandura, president of the Federal Association of Wholesale, Foreign Trade, and Services (BGA), stressed the urgency for negotiated solutions with the US, stating, "The US is our most important trading partner, and we can't do without them." Moreover, the sports sector in Germany may be indirectly affected as these tariffs could impact the industries that supply materials or equipment to the sports industry, potentially causing a ripple effect.
