Germany's Economy Grows 0.2% in Q1 Amid Tariff Concerns

Germany's economy saw modest growth of 0.2% in the first quarter of 2025, ending a streak of contractions and briefly avoiding recession thanks to increased investment, household spending, and easing inflation. This uptick offered some relief for incoming Chancellor Friedrich Merz, but economists caution that the recovery may be short-lived due to escalating US tariffs on EU exports and broader trade tensions. US importers rushed to buy German goods ahead of the new tariffs, temporarily boosting exports, but the 10% tariff now in place—and the threat of further levies—are expected to weigh heavily on growth through the rest of the year. Despite improved consumer and business confidence and proposed measures such as increased public spending and tax cuts, Germany’s government has downgraded its 2025 growth forecast to zero, citing adverse effects from US trade policy. On an annual basis, the economy remains weak, contracting for the seventh consecutive quarter, and economists warn that a return to recession by summer is likely if trade pressures persist. Overall, the fragile recovery underscores deep concerns about Germany's long-term competitiveness and vulnerability to external shocks.