Customs dispute with the USA: German GDP is in danger of shrinking again!

Customs dispute with the USA: German GDP is in danger of shrinking again!

Economic pessimism in German industry is growing threateningly, especially due to the ongoing trade dispute with the USA. According to reports from sueddeutsche.de Experts from the Federation of German Industries (BDI) expect gross domestic product (GDP) to decline by 0.3 percent in 2023. This would mean that the German economy has already contracted for two years in a row, as BDI President Peter Leibinger emphasizes.

Particularly worrying is the potential impact of US tariffs coming back into force, which could impose 20 percent on European exports from July. BDI General Manager Tanja Gönner warns that these tariffs could burden the German economy by 0.3 percentage points if they are not withdrawn in time. The Ifo Institute has even calculated in simulations that a new tariff package could shrink German industry by 2.8 percent in the medium term.

Impact on exports and production

The effects of the customs dispute are already noticeable: in April 2025, German exports fell by 1.7 percent to a total of 131.1 billion euros. Industrial production fell 1.4 percent this month. These declines were also described as dramatic by DIHK foreign trade chief Volker Treier, especially with regard to exports to the USA. daily news reports on the serious decisions that the customs dispute entails and which are clearly reflected in the economic data.

The Federal Ministry of Economics warns of further setbacks for the economy, which will be exacerbated by the existing trade policy uncertainty. Nevertheless, some experts are tempering the pessimism and are talking about signs of a possible stabilization of the industry. Commerzbank emphasizes that higher order numbers and the increase in the ifo index are positive signals.

Looking into the future

The Bundesbank expects the German economy to recover slowly and expects stagnation in 2025. This forecast is tempered by the uncertainties surrounding US trade policy, which continues to weigh on economic growth. Nevertheless, measures such as the federal government's fiscal package and possible interest rate cuts by the European Central Bank could promote growth. The euro zone itself recorded growth of 0.6 percent in the first quarter of 2025, while German economic output grew by 0.4 percent. However, according to experts, this data is only of limited significance as the effects of the tariff dispute are not yet fully visible.

Overall, the situation remains tense and it remains to be seen how the trade dispute and the economic conditions will develop in the coming months.