German experts slash growth outlook amid Trump tariffs

German economic institutes on Thursday cut their growth forecast for 2025 to 0.1% from the 0.8% expected in September.

While the prediction takes into consideration initial US tariffs on steel, aluminium and cars, it does not factor in the further "reciprocal" tariffs that US President Donald Trump announced on April 2, and suspended on Wednesday.

What do the forecasters say?

The grim forecast portends a third year of sluggish growth, in part due to earlier US tariff policies, and as Germany faces economic headwinds from several directions. 

The additional suspended tariffs could double the hit on Europe's economy even further, the six think-tanks said — dragging Germany into a third consecutive year of recession. However, they warned that it was difficult to quantify the effect.

"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 US ranked as Germany's top trading partner last year and is a major market for exports including cars, machinery and chemicals. 

Tariffs not the only constraint

Adding to its transatlantic trade woes, Germany faces a range of deep-seated structural issues.

They include a shortage of skilled workers, increased competition from China and suffocating 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.