Germany is heading into a critical election with an economy that has barely grown since the pandemic, posting its first back-to-back annual contractions since the early 2000s. The country’s moribund economy, coupled with Donald Trump’s looming import tariffs, makes it an even harder task for the new government to fix.
Failure to boost economic growth would be costly, as Carsten Brzeski, a senior economist at ING, warned that voters may turn to the far-right AfD party if the parties forming the next coalition fail. The German economy, the world’s third-largest, has been stagnant since the pandemic and is expected to grow by only 0.3% this year.
Trump’s return to the White House presents a new challenge for Germany’s exporters, who rely heavily on foreign demand. China’s slowing economy and rising electric vehicle manufacturers have snatched market share from Western rivals, making it harder for German automakers like BMW, Mercedes, and Audi to compete. The country’s energy-guzzling industrial firms are also paying more for their main fuel, natural gas.
The impact of Trump’s tariffs will be felt across industries, with about 1.2 million jobs in Germany dependent on exports to the US. If foreign producers pass on most of the new tariffs to their American customers, German exporters could become less competitive. The extent of the impact depends partly on the eventual levels of the tariffs.
Boosting Germany’s growth will require more than just finding ways to deal with Trump’s tariffs. The country’s entire business model may need an overhaul, shifting from old industries to a future-oriented economy focused on new technologies like artificial intelligence. If this doesn’t happen, Germany could risk losing its status as the third-biggest economy in the world.
Source: https://edition.cnn.com/2025/02/21/economy/germany-election-economy-tariffs-intl/index.html