Economists Predict Third Consecutive Year of Recession for Germany

Economists have raised concerns about the likelihood of a third consecutive year of recession for Germany, attributing this potential downturn to the trade war initiated by former US President Donald Trump. According to analysts from Deutsche Bank Research, the newly formed German government may struggle to mitigate the immediate impacts of trade disruptions.

Forecasts for Germany's economic growth have already been revised downwards, with a previous prediction of 0.3% growth for 2025 now considered overly optimistic. The analysts warn that if the announced reciprocal tariffs imposed by the United States become permanent, the risks to the economy could lead to a technical recession.

Germany's economy contracted by 0.3% in 2023 and is expected to shrink further by 0.2% in 2024. A technical recession is typically defined as two consecutive quarters of negative growth, and with a slight decline in Gross Domestic Product (GDP) of 0.2% observed in the final quarter of 2024, further contractions in the first and second quarters of 2025 could confirm this trend.

Carsten Brzeski, chief economist at ING, expressed that should the trend of declining GDP continue, the year will likely be irretrievable for the economy, regardless of any interventions by the new government. In coalition talks, the Union and SPD parties have proposed a massive infrastructure package valued at EUR500 billion, but experts believe its effects will not be felt until 2026.

The German Foreign Trade Association (BGA) has signaled its intention to lower export expectations for the year due to the ongoing trade conflict. The BGA's previous forecast of a 2.7% decline was already seen as pessimistic, and further downward adjustments are anticipated in the coming weeks.

BGA President Dirk Jandura indicated that, despite ongoing negotiations with the US, the consequences of the trade war initiated by the US will likely result in a significant economic downturn, increased inflation, and job losses across both the US and Europe.

Last week, President Trump announced substantial tariffs on imports from nearly all countries, imposing a 20% tariff on most goods from the European Union and a staggering 25% on steel, aluminum, and automobiles. In retaliation, China has announced retaliatory tariffs of 34% on US imports, leading to a global market downturn.