60% of Germany's exports are under threat: The automotive and machinery sectors are in direct confrontation with Washington's policies.
The German "Ifo" Institute for Economic Research painted a bleak picture of the future of the German economy under the continued hardline tariff policies of US President Donald Trump. Lisandra Flach, head of the Ifo Center for Foreign Economics, warned that Germany is currently receiving "three simultaneous blows" that are striking at the heart of its industry. The tariffs have caused a contraction in direct exports to the United States, indirectly led to a decline in Chinese demand for German goods, and diverted surplus Chinese goods to the European market, intensifying competition for domestic products.
The institute's simulations indicate that this isolationist trend will permanently reduce German economic performance by approximately 0.13%, a figure Flach described as "significant" given Germany's years of recession. The institute also predicted a sharp decline in German exports to the United States by 15% and to China by 8% in the medium term, placing strategic sectors such as automobiles, machinery, and pharmaceuticals, which together account for 60% of exports, in a very precarious position.
The damage is not limited to trade; it has also poisoned the investment climate. The institute revealed that 30% of German companies have postponed their planned investments in the United States, while 15% have canceled them altogether due to "uncertainty." Despite some minor positive exceptions in the services and agriculture sectors, these remain marginal gains that do not compensate for the scale of the major industrial losses.
Although the "Summer 2025 Agreement" between Brussels and Washington, which capped tariffs at 15%, averted a full-blown trade war, the Ifo Institute believes that uncertainty still prevails. As Trump completes his first year in office (on January 20), German markets remain hostage to his decisions, which are described as "unpredictable," making the restoration of economic stability in the Eurozone a distant prospect in the current protectionist climate.
