Institutes slash German growth forecast amid Trump tariffs

BERLIN: Leading economic institutes Thursday slashed their 2025 growth forecast for the German economy to near stagnation, warning Europe's struggling top economy will face extra pain from the US tariff blitz.

The six think-tanks, in their latest joint forecast, now predict GDP growth of just 0.1 percent for 2025, down from the 0.8 percent expansion they forecast in September.

"The geopolitical tensions and the protectionist trade policy of the USA are exacerbating the already tense economic situation in Germany," said Torsten Schmidt, head of research at the RWI-Leibniz Institute for Economic Research.

The downgrade comes the day after the French and Italian governments cut their growth forecasts for the year on, citing new barriers to trade, while Spain warned that its growth would suffer, without giving a figure.

US President Donald Trump's tariffs on aluminium, steel and vehicle imports that came into effect in March and April would likely reduce Germany's economic growth by 0.1 percentage points each for 2025 and 2026, the institutes calculated.

Additional "reciprocal" tariffs announced by the United States on April 2 could double the hit, the institutes said, though they warned that it was difficult to quantify the effect.

Those tariffs were paused for most countries on Wednesday.

The United States was Germany's top trading partner last year and a major market for its exports, ranging from cars to machinery and chemicals.

Adding to its problems, Germany faces a range of deep-seated structural issues including a shortage of skilled workers, increased competition from China and stifling taxes and bureaucracy, the institutes warned.

"These cannot be solved by simply increasing government spending, and make reforms to boost potential output all the more urgent," they said in a statement.