Germany’s economy will not grow for the third year in a row, the government said on Thursday, scaling back a previous prediction as President Trump’s tariffs bite into Europe’s largest economy, leaving it stagnant.
In January, the German government had predicted 0.3 percent economic growth, but Mr. Trump’s tariffs of 25 percent on imported automobiles, steel and aluminum threaten to hit Germany’s export-oriented economy hard, as could the turbulence in the markets caused by the yo-yo nature of how the tariffs have been imposed.
“The German economy, which is already suffering from weak foreign demand and reduced competitiveness, is particularly affected by the U.S. trade policy,” Robert Habeck, Germany’s economy minister, told reporters in Berlin on Thursday.
Germany is the only member of the Group of 7 nations whose economy has failed to grow in the past two years.
A new German government will take power after the expected next chancellor, Friedrich Merz, is sworn in on May 6. He has promised to spur growth, aided by looser borrowing limits that will allow the government to spend hundreds of billions of euros on defense and infrastructure.
But many of the problems plaguing Germany are homegrown, and economists warn that unless the country tackles some of the underlying structural problems — including a burdensome bureaucracy, one of Europe’s highest corporate tax rates and soaring energy prices — even the extended borrowing will not bring relief.
“It is still unclear whether and which reforms the next federal government will implement,” Mr. Habeck said. “The structural problems must be tackled quickly and consistently. This will determine whether the German economy receives a boost to its competitiveness or whether all of the money goes up in smoke.”
Germany is also facing a demographic problem, leading to a shrinking work force and a drop in productivity. At the same time, the country is grappling with a surging anti-immigrant sentiment, which is making it difficult for companies to attract the skilled foreign workers they need to remain competitive.
Many companies have scaled back their growth outlook as they digest the 10 percent blanket tariff on goods exported to the United States and await the outcome of a 90-day pause on higher levies.
The trade war is expected to be a drag on the economy next year as well. The government now predicts growth of 1 percent for 2026.
“If the new German government does not take decisive and swift countermeasures, we could even face a significant third consecutive year of recession,” said Helena Melnikov, managing director of the German Chamber of Commerce and Industry.
“It is therefore all the more important that the future German government shifts into forward gear and finds solutions to the customs dispute with the U.S.A., especially at the E.U. level,” Ms. Melnikov said.
This week, the International Monetary Fund also predicted that Germany’s economy would not grow this year, cutting its forecast to 0 percent from 0.2 percent in January. It noted that stronger consumption driven by rising wages and the willingness of the next government in Berlin to take on more debt could have a positive effect on growth.
Growth across the wider eurozone, which includes Germany and 26 other E.U. members, was also scaled down to 0.8 percent from 1 percent, the I.M.F. said.