Germany could fall into two more years of recession if tensions with the United States escalate into a full-scale trade war, the country’s central bank warned on Friday, June 6th. The Bundesbank’s warning adds to growing concerns about the future of Europe’s largest economy, which has already been struggling in recent years.
According to the Bundesbank, if US President Donald Trump’s proposed tariffs are fully put in place from July and the European Union responds with its own tariffs, Germany’s GDP would fall by 0.5 percent in 2025 and 0.2 percent in 2026. The downturn would be caused by a “marked decline in exports and significant uncertainty weighing on investment,” the bank said.
Germany, which depends heavily on exports, is especially vulnerable. In 2024, the US was its biggest trading partner, buying large amounts of German cars, pharmaceuticals, and machinery.
“The erratic trade policy of the United States is putting pressure on the German labour market,” Federal Employment Agency head Andrea Nahles said. “The problem is this lack of predictability, which is causing us massive damage. It is preventing companies from investing, hiring and training people.”
