Bundesbank sounds alarm over US trade war
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Germany's central bank sharply downgraded its growth outlook for the country yesterday. And the Bundesbank also warned prospects for Europe's largest economy could sink even further if Donald Trump imposes damaging trade tariffs. The bank now expects gross domestic product to shrink by 0.2 per cent this year – a second year in a row of contraction – having previously forecast growth of 0.3 per cent.
And it slashed the outlook for 2025 growth from 1.1 per cent to 0.2 per cent. The performance could be even worse if US president-elect Trump fulfils pledges including the imposition of 60 per cent import tariffs on Chinese goods and 10 per cent on those from other economies including Germany. That could knock as much as 0.6 percentage points off growth next year, the Bundesbank predicted.
The export-driven German economy is likely to 'suffer considerably from such a US policy shift,' a report published by the central bank said. Concern: The Bundesbank warned prospects for Germany's economy could sink even further if Donald Trump imposes damaging trade tariffs.
'Its strong reliance on exports makes it particularly vulnerable to the decline in foreign demand resulting from the global trade losses triggered by the restrictive trade policy. 'The heightened uncertainty further burdens the German economy.' Germany's industrial sector – including its once-mighty car industry – has been struggling since it lost access to cheap Russian energy due to the war in Ukraine and as China's demand for German exports faded.
