“The new US tariffs and uncertainty about future US policy are initially dampening economic growth,” Bundesbank President Joachim Nagel said.
“This is hitting German industry at a time when it was beginning to stabilize after a long period of weakness,” he said.
With new figures from the Federal Statistical Office showing a dip in German exports in April, the Bundesbank expects a significant decline in exports for the current year due to US trade policy, with little improvement in sight for 2026.
The euro’s appreciation against the dollar – which makes products from companies in the eurozone more expensive on world markets – is also weakening the competitiveness of German exporters at a time of growing competition from China.
This is expected to delay the German economy’s recovery until the government’s planned multi-billion investments in defence and infrastructure provide a boost.
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The Bundesbank expects real GDP to grow by 0.7% in 2026, slightly below its forecast of 0.8% in December. Meanwhile, it has raised its expectations for 2027 from 0.9% to 1.2%.
But the uncertain course of US President Donald Trump’s trade policy looms over the forecasts. A tightening of US trade policy and a renewed shock to confidence in the US economy and the dollar would, in the Bundesbank’s view, pose a considerable risk to Germany’s expected recovery.
In more positive news, the bank’s figures showed that inflation is slowing down. It expects an inflation rate of 2.2% for 2025, calculated using the EU standard Harmonized Index of Consumer Prices (HICP), and of 1.5% for 2026.
From 2026 onwards, the core rate, which excludes volatile energy and food prices, is also likely to stabilize at around 2%, according to the central bank.
By Jörn Bender, dpa
