MNI BRIEF: US Policy Shift May Cause German Recession - Nagel
MNI (LONDON) - Proposed US tariffs on foreign goods, domestic tax cuts, the large-scale deportation of immigrants and retaliatory actions by America’s trading partners could cut 1.7% from German GDP this year, Bundesbank president Joachim Nagel said in a speech on Monday.
The German economy is “particularly vulnerable” to falling foreign demand due to its strong export focus, and would suffer “considerably” were the policies already announced fully enacted, he said. Last year German exports grew by just 0.6% for every 1% of global GDP added, compared with 1.4% in 2024, he said, citing German Council of Economic Experts analysis. (See MNI INTERVIEW:German Growth Weak Despite Wages- GCEE's Werding )
In December the Bundesbank predicted Germany’s economy would expand by 0.2% in 2025 and 0.8% in 2026. But while the devaluation of the euro could strengthen price competitiveness, it will not be enough to compensate for the negative effects of US trade and domestic policies, Nagel said. "Taken together, economic output in 2027 would be almost 1.5 percentage points lower than forecast."