The German Institute for Macroeconomic Policy released a report on the 16th, stating that if the US government implements tariffs on EU goods at the planned rate starting from August 1st, it will significantly pressure the German economy.
The report indicates that once the US tariff measures are implemented,
they will essentially suppress Germany’s economic growth in 2025 and limit its growth rate to around 1.2% in 2026. Previously, the institute had predicted that Germany’s economy would grow by 0.2% this year and 1.5% next year.
Despite the impact on the German economy, the report believes that the US may suffer more severe losses in its own economy. It predicts that domestic consumer prices in the US will rise due to tariff hikes, constraining household consumption. Furthermore, under inflationary pressures, the US monetary policy is expected to continue its tightening trend, further dragging down economic growth.
The report also points out that the US has been one of Germany’s most important export markets for a long time, accounting for nearly 10% of Germany’s total exports before 2024. A decline in US demand is expected to further suppress German exports, weakening the momentum of German economic growth.
In light of increasing external uncertainties, the German Institute for Macroeconomic Policy calls on the German government to accelerate the implementation of fiscal stimulus plans to stabilize the economic foundation. It also suggests that the German government collaborate with the European Commission to study providing support to key industries hit hardest by tariffs.
Trump’s tariff policies have impacted the global economy.