Germany Expects Zero Economic Growth in 2025
Outgoing German Economy Minister Robert Habeck said on Thursday that the German economy is expected to record zero growth this year, attributing this to the sweeping tariffs imposed by US President Donald Trump.
'US trade policy, which includes the threat of tariffs, has a direct impact on the German economy, which is highly dependent on exports,' Habeck explained while presenting the economic forecast.
The German government had previously forecast a slight growth in GDP of 0.3% this year for Europe's largest economy, which has been shrinking for the past two years.
The German government also lowered its growth forecast for 2026 to 1% from 1.1%.
The United States is Germany's largest trading partner, accounting for about 10% of its exports last year, from cars to chemicals. The German Economy and the Challenges of Tariffs
Under the Trump administration, the United States has now imposed a 10% tariff on EU exports to the country, after previously announcing a 20% tariff that was later suspended.
'Tariffs and trade policy fluctuations affect the German economy more than other countries,' Habeck added.
'We rely on open markets, efficient markets, and a multinational world, and that is what made this country rich.'
German GDP contracted by 0.3% in 2023 and 0.2% in 2024, hit by rising energy prices following Russia's full-scale invasion of Ukraine.
The German economy has also been affected by increased Chinese competition in key industries such as automobiles and machinery.
'I would say that we are now undergoing a fundamental change in the foundations on which the German economy relies,' Habeck said.
He added: 'Our main trading partners, China, the United States, and our neighbor Russia, are causing us problems.'
Habeck also said that the government has not taken significant steps to stimulate the economy since the collapse of the coalition government led by former Chancellor Olaf Scholz in November, paving the way for elections next February.
He said, "There have been no concrete initiatives to combat the recession through legislation or measures for half a year."
Habeck expressed hope that a new investment package worth several hundred billion euros could help revitalize the economy under the leadership of Governor Friedrich Merz, who is expected to take office in early May.
"It is good that investments are finally being made," Habeck said, adding that they "could somewhat offset the decline or pressure on foreign trade." The growth forecasts took into account the "positive impetus" from debt-financed investments and assumed there would be no further escalation of the tariff "madness," according to Habeck.
He also called on his successors to strengthen European unity and independence so that Germany could confront the two economic giants.
He said, "Made in Germany is over. We are a single market, and through this market we will bring investment back to Europe."
He continued, "We must support the European Union in taking a clear position, negotiating confidently with the United States, and at the same time being prepared to impose effective countermeasures."
Helena Melnikoff, president of the German Chamber of Commerce and Industry, said, "The situation of the German economy is grave."
She called on "the next federal government to move forward and find solutions to the tariff dispute with the United States at the EU level," stressing that time is of the essence.
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