Habeck warns of deflation: Trump tariffs are endangering Germany's economy!

Habeck warns of deflation: Trump tariffs are endangering Germany's economy!

Economics Minister Robert Habeck recently warned of the potential impact of US tariffs on the German economy and spoke of possible “deflation”. This warning comes as Germany's economy grew by 0.4% in the first quarter of 2025. However, this increase is not attributed to an economic recovery, but rather to advance purchases by US importers who want to protect themselves against impending tariff increases. New negotiations on tariffs could increase import taxes up to 50%, which could further aggravate the economic situation. Despite the claim that Donald Trump is hurting Germany, current economic conditions show a nuanced picture of how Neopress reported.

Habeck highlights that the potential deflation could be exacerbated by changes in the international market. In particular, China's economy could try to open up new markets in Europe in order to remain competitive. This development could lead to an oversupply in Germany, which would push prices down. Deflation is defined as a decline in prices across the board and is often associated with consumer reluctance to purchase. However, in times of high debt and infrastructure investments, falling prices are not to be expected.

Market situation and competition

The discussion about US tariffs not only affects prices, but also the competitiveness of German industry. Experts in the US believe the new tariffs will raise prices for imported products in the US, which could result in Chinese producers turning their attention to the European market. They could offer their products at lower prices in Germany, which would put the domestic industry under great pressure. In the worst case, this could mean that German companies cannot compete with the dumping prices, warns Habeck. An example of this type of market displacement is the solar industry, where Chinese manufacturers flooded the market with cheap solar modules, which placed a significant burden on domestic manufacturers.

The exact consequences of the US tariff decisions are currently difficult to estimate. But the risk of deflation and falling prices is becoming increasingly likely, which could harm Germany as a business location in the long term. Habeck also fears that the international trade structure will adapt, which could lead to “evasive movements” that endanger industrial production in Germany. In this context, he criticizes the general enthusiasm for the term “disruptive”, as this disruption could endanger control and order in the market economy World reported.