German economy to slowdown amid rising US tariffs: ifo
The Ifo Institute fears that the German economy will contract again as early as the summer. Tightened US tariff policies prompted early goods purchases, which temporarily boosted German exports and industrial production, leading to a 0.2 per cent GDP increase in Q1 2025, according to the Ifo Institute.
'However, the noticeable increase in tariffs on imports from the EU that came into force in April and the threat of further tariff increases weighed on the further course of the economy in Germany,' said Timo Wollmershäuser, head of forecasts at ifo .
The results of the ifo Business Surveys from April also point to a decline in economic output. The ifo Business Climate has improved slightly, recording its fourth consecutive rise. However, this was mainly due to an improved assessment of the current situation, while the outlook for the coming months deteriorated, particularly among industrial companies.
The ifo Institute warns of a potential German economic contraction by summer 2025, following a modest 0.2 per cent GDP rise in Q1 driven by early US purchases ahead of tariff hikes. New US tariffs on EU imports and rising uncertainty are dampening future prospects, especially in industry. While current conditions improved slightly, business expectations declined.
According to Wollmershäuser, it is not yet clear whether these assessments will be confirmed in the coming months. 'At the same time, industrial companies have reported a sharp increase in uncertainty, which means they are currently finding it more difficult to assess their business than usual.' In particular, the US administration's shift in economic policy harbours risks. Opportunities could arise if the new German government takes swift decisions.
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