German Economic Institutes Cut 2025 Growth Forecast to 0.1% as Tariffs Impact Economy

Germany's economic outlook for 2025 has been significantly downgraded, with growth now expected to be just 0.1%, down from the previously predicted 0.8%, primarily due to the impact of U.S. tariffs on steel, aluminum, and automobiles. This bleak forecast follows two consecutive years of economic contraction, marking a challenging period for Europe's largest economy. The tariffs are exacerbating existing structural weaknesses, including a skilled labor shortage and diminishing demand from China. German lawmakers are attempting to stimulate growth through a coalition agreement that includes a substantial infrastructure and defense spending package, yet these measures may not yield immediate results. Unemployment is projected to rise to 6.3% this year and inflation is predicted to remain around 2.2%. Future growth is anticipated to improve slightly in 2026, with a forecast of 1.3%.