Trump has condemned Germany to a third year of recession

The introduction of import duties by the Donald Trump administration condemns the German economy to the third year of recession, Deutsche Bank economists say.

The trade war unleashed by US President Donald Trump has not only brought down stock quotes around the world. According to economists' forecasts, radical measures initiated by the White House also increase the likelihood of a repeat recession in Germany — despite assurances from the future German Chancellor Friedrich Merz that he is ready to take decisive action.

"It is more urgent than ever that Germany restore its international competitiveness as soon as possible. This issue should become central to the coalition negotiations. We need lower taxes for companies and citizens, a significant reduction in paralyzing bureaucracy, lower energy prices and stabilization of social security costs," Merz said on the eve of a new round of coalition talks between the CDU/CSU and the SPD, which started on Monday.

However, experts doubt that the new federal government will be able to respond promptly to Washington's decision and take emergency measures.

"In the short term, it will be difficult for the new government to mitigate the immediate trade shock," said economists Mark Shattenberg and Robin Winkler.

According to them, the current forecast of German GDP growth for 2025 (0.3%) may turn out to be too optimistic if the duties imposed by the United States remain for a long time.

"In general, the risks to the German economy in 2025 point to the third year of recession in a row," the experts concluded.

The GDP of Europe's largest economy has already declined by 0.3% in 2023 and by 0.2% in 2024.

"In the short term, the trade war has increased the likelihood of a full—fledged technical recession in Germany," agreed Carsten Brzeski, ING's lead economist.

In his opinion, after a 0.2% decline in GDP in the fourth quarter of 2024, a further decline may follow in the first and second quarters of 2025. Two consecutive quarters of negative growth are considered a technical recession.

"Thus, it will not be possible to save the whole of 2025, even if the new government takes some measures," Brzeski stressed.

The German Foreign Trade Association intends to lower its already modest export forecasts for the current year due to a large-scale trade conflict.

"Even if negotiations with the United States are still possible, the consequences of this war launched by the United States will lead to a drop in economic growth, higher inflation and job losses in the United States and Europe," said Dirk Yandura, president of the association.

EADaily reminds that on April 2, US President Donald Trump announced the introduction of customs duties on products from 185 countries and territories. Universal tariffs of 10% came into force on April 5, individual tariffs will be effective from April 9.