Frankfurt (Germany) (AFP) – Germany’s economy is expected to post zero growth this year, outgoing Economy Minister Robert Habeck said Thursday, blaming US President Donald Trump’s sweeping tariffs. “The US trade policy of threatening and imposing tariffs has a direct impact on the German economy, which is very export-oriented,” he said, presenting the forecast. The German government had previously expected slight GDP growth of 0.3 percent for this year for Europe’s top economy, which shrank for the past two years. It also cut its growth forecast for 2026 to one percent from 1.1 percent.
The United States is Germany’s largest trading partner and last year took about 10 percent of its exports, from cars to chemicals. Under Trump, it now levies a 10 percent tariff on European Union exports into the country, having earlier announced a 20 percent rate which was then paused. “Tariffs and trade policy turbulence are hitting the German economy harder than other nations,” Habeck said. “We depend on open markets, functioning markets, and a globalised world,” he told a Berlin press conference. “That’s what has made this country rich.”
German GDP shrank by 0.3 percent in 2023 and by 0.2 percent in 2024, as it was battered by higher energy prices following Russia’s full-scale invasion of Ukraine. It has also been hit by increasingly fierce Chinese competition in key industries such as automobiles and machinery. “I would say that we are going through a paradigm shift when it comes to the basic earners for the German economy,” Habeck said. “Our big trade partners, China and the USA, and our neighbour, Russia, are causing us problems.”
Habeck also said the government had taken few steps to stimulate the economy since the coalition of outgoing Chancellor Olaf Scholz collapsed in November, paving the way for elections in February. “For half a year now, hardly any initiative has been taken to counteract the stagnation through legislation or measures,” he said.
Looking ahead, Habeck voiced hope a new spending package worth many hundreds of billions of euros could help revive the economy under conservative Friedrich Merz, who is expected to take power in early May. “It’s good that investments are finally being made,” Habeck said, adding that they “can offset the slump or the pressure on foreign trade to some extent”. The growth forecast took into account the “positive impetus” from the debt-financed investments and also assumed there would be no further escalation of the tariff “madness,” he said.
Habeck also called on his successors to strengthen European unity and independence so that Germany could hold its own against economic giants. “Made in Germany is over,” he said. “We are a single market and it is through that market that we will bring investment back into Europe.”
“We must support the EU in taking a clear position, in negotiating confidently with the USA and at the same time helping it be prepared to impose effective counter-measures.” “The situation of the German economy is serious,” said Helena Melnikov, head of the German Chamber of Industry and Commerce. She called for “the future federal government to move forward and, above all, find solutions to the tariff dispute with the US at the EU level,” stressing that time is of the essence.
© 2024 AFP
