Germany's government has cut its 2025 growth forecast to zero, a stark sign that Europe's largest economy is still struggling to escape the slump that has already dragged it through two years of contraction. Outgoing Economy Minister Robert Habeck blamed the downgrade largely on Donald Trump's trade policy, arguing that the tariffs and tariff threats coming from Washington are hitting Germany harder than most other countries.
The numbers behind the new forecast are sobering. Germany contracted by 0.3% in 2023 and by 0.2% in 2024, making it the only G7 economy that failed to grow over the past two years. On the government's new projection, 2025 would become the third straight year without growth. That is a severe mark for an economy built around exports, manufacturing and industrial supply chains that depend heavily on predictable trade.
Habeck said there was above all one reason for the revision: Trump's trade policy. The U.S. tariffs already in place include a blanket 10% duty on imports and 25% levies on cars, aluminum and steel. The European Union is still negotiating with Washington to avoid a further 20% tariff on goods from the bloc. Because the United States is Germany's largest trading partner, the shock reverberates through sectors such as automotive production and pharmaceuticals, where export exposure is especially high.
The government's warning did not appear in a vacuum. Germany has already been dealing with higher inflation after the pandemic and then the economic fallout from Russia's invasion of Ukraine. That combination has kept pressure on consumers and manufacturers alike. The latest forecast suggests those headwinds have not yet faded, even as policymakers look for signs of recovery.
Habeck's comments came while he was in Washington for the spring meetings of the World Bank Group and the International Monetary Fund. He said the tariff fight was a direct drag on an economy that depends on trade with both the United States and China, while also facing strong competition from Chinese industry in sectors such as cars and machinery. That makes Germany's problem broader than the U.S. dispute alone. It is also about the competitiveness of an industrial model under strain.
The Bundesbank's assessment was even more cautious. President Joachim Nagel said the best-case outcome was stagnation and did not rule out a slight recession in 2025. He said uncertainty remained high. That caution matters because it suggests the official government forecast may still be on the optimistic side of a fragile outlook. In other words, zero growth is not being presented as a floor so much as a central estimate in a still-uncertain year.
Habeck nevertheless pointed to one possible source of relief: a spending package worth many hundreds of billions of euros that could come under conservative leader Friedrich Merz, expected to take power in early May. That package, if enacted, would be aimed at reviving demand and supporting activity. But the article available on April 25 does not show that such measures were already in place. For now, Germany is facing a familiar combination of weak demand, trade friction and industrial unease, with few signs that the pressure is ending.
