DW: U.S. tariffs hamper Germany's economic recovery, production and exports decline

Despite the signs of hope, Germany still looks far from sustained economic growth. German industry has started the second quarter with a setback.

According to data from the Federal Statistical Office, industry, construction and energy suppliers reduced production in April by 1.4%, compared to the previous month, a sudden significant decline.

In April, German exports fell for the first time since October 2024. Statisticians estimated a decrease of 1.7% compared to the previous month, to 131.1 billion euros.

The frightening effects of the tariff war launched by US President Donald Trump are slowly beginning to manifest themselves in economic data. "Instead of a new beginning, there is disappointment," comments Volker Treier, Director of Foreign Trade at the German Chamber of Industry and Commerce (DIHK), regarding export data. "The drastic drop in exports to the US has a significant impact."

The same applies to industrial production: The Federal Ministry of Economy warns of possible obstacles due to the trade uncertainty stemming from US tariff policy. "As a consequence, the prospects for a recovery of industrial production have become a little more bleak recently," the ministry states.

Does it look like a turning point on the horizon?

However, experts also warn against excessive pessimism. Sebastian Dullien, scientific director of the Hans Böckler Foundation's Institute for Macroeconomics and Economic Research, believes that the decline in exports and production is not a cause for unnecessary concern: "Overall, the indicators suggest that the situation in the industry is stabilizing and that we may be approaching a turning point for the better."

Commerzbank also sees signs of a potential improvement. Analyst Ralph Solveen points to the increase in the number of orders and the increase in the ifo business climate index: "Therefore, we assume that the German economy will return to growth in the coming quarters, although higher US customs tariffs and structural problems in the German economy will prevent a strong recovery."

German Central Bank predicts delayed recovery

The German Central Bank (Bundesbank) also issued an opinion on the development of the German economy. According to him, Germany will slowly come out of the abyss, due to uncertainty over US trade policy. According to the German Federal Bank's semi-annual forecast, the economy will stagnate this year. In its December forecast, it still expected a slight increase of 0.2%.

"New US customs tariffs and uncertainty about future US policy will initially hamper economic growth," explained Joachim Nagel, president of the German Central Bank. In 2027, the massive government spending planned for infrastructure and defense will strongly boost the economy.

Fiscal packages can accelerate recovery

Other economists also believe that the government's multibillion-euro fiscal package could have positive effects. "The German economy is benefiting from the ECB's rate cuts and, soon, from the big fiscal package, although the increase in US tariffs is hampering the recovery," says Jörg Krämer, chief economist at Commerzbank.

According to IMK economist Dullien, a slow acceleration of growth is expected in the coming months, mainly thanks to the measures announced by the general government. "Starting from July, the improved conditions of depreciation of expenses should lead to an increase in demand for investments. Additionally, companies are likely to recoup investments deferred at that time. Public investments financed by the special infrastructure fund should boost growth."

Eurozone: Growth exceeds expectations

Positive economic signals came from the Eurozone. According to the data of the Eurostat Statistical Office, economic activity increased by 0.6% in the first quarter compared to the previous quarter. In the third assessment, the increase was significantly revised from 0.3% in the second assessment.

The data on economic growth in Germany have also been corrected. According to these figures, the German economy grew by 0.4% between January and March. Initially, an increase of only 0.2% was announced. As the strongest economy in the 20-nation Eurozone, the German economy is particularly important for the well-being of the monetary area.

However, it should be noted that the potential consequences of the tariff dispute with the US have not yet been felt during this period. Therefore, the relevance of the data for the eurozone and Germany is quite limited./DW