Germany sees the economy stagnating in 2025 as Trump's trade policy weighs on it

BERLIN (AP) — The German government forecast Thursday that the country's economy, Europe's biggest, will stagnate this year as U.S. President Donald Trump's tariffs and trade threats weigh on its performance following months of political uncertainty.

Outgoing Economy Minister Robert Habeck said the government cut its 2025 outlook to zero from the modest growth of 0.3% it predicted at the end of January. For next year, it is forecasting growth of 1%, slightly lower than the 1.1% it predicted three months ago.

“There is above all one reason for this, namely Donald Trump's trade policy and the effects of the trade policy on Germany,” Habeck told reporters in Berlin. He noted that Germany also hasn't had a government with a parliamentary majority to set policy since early November, and the new government isn't yet in place after an election in February.

Germany hasn’t seen significant economic growth in five years. The country for years expanded exports and dominated world trade in engineered products like industrial machinery and luxury cars.

But it’s suffered from increasing competition from Chinese companies, along with many other factors, and the economy contracted in each of the last two years.

Trump's tariffs have added a further risk to German exports. Last year, the United States was Germany’s biggest single trading partner for the first time since 2015, displacing China from the top spot as exports to the Asian power declined.

The German parliament plans to meet on May 6 to elect Friedrich Merz as the country’s next leader, if all the parties in his proposed government approve a coalition agreement reached earlier this month.

Last month already, the prospective partners pushed plans through parliament to enable higher defense spending by loosening strict rules on incurring debt and to set up a huge infrastructure fund that’s aimed at boosting the economy.