A recent survey shows that 31% of German machine manufacturers are optimistic about US sales prospects, though many still hold negative expectations.

Despite some initial growth in the first quarter of 2025, driven by companies adjusting supply chains in anticipation of tariffs, the Bundesbank reports that the German economy stagnated in the second quarter, with GDP expected to remain flat.

The first quarter saw an unexpected boost in industrial production and exports, driven by anticipatory shipments due to US tariff threats.

While business sentiment has improved somewhat due to expected government investments, the overall economic outlook remains weak, with underutilized industrial capacity and cautious consumer spending.

The Bundesbank's latest report indicates that after a surprising 0.4% growth in the first quarter, Germany's economy has lost momentum, and stagnation is forecasted for the second quarter, potentially marking the third consecutive year without growth.

The Bundesbank warns that US tariff policies, especially the threat of a 30% tariff on EU imports starting August 1, 2025, pose significant risks to Germany's exports and overall economy.

These US tariffs, including a 10% base tax on EU imports and higher tariffs on cars, steel, and aluminum, could negatively impact Germany, which relies heavily on exports to the US, its most important market.

The Institute for Macroeconomics and Business Cycle Research suggests that although a 30% US tariff would burden Germany's recovery, it would not completely derail it.

Bundesbank President Joachim Nagel emphasizes the importance of a swift resolution with the US but warns that it should not be achieved at any cost, as tariff uncertainties hinder economic development.

The EU is attempting to prevent escalation in the trade dispute by holding back on counter-tariffs, hoping for a negotiated settlement.

Looking ahead, the Bundesbank's June forecast indicates that Germany might face its third consecutive year of no growth, highlighting the ongoing economic challenges.

Despite the weak outlook, there is some optimism due to anticipated government investments, but the positive effects are expected to be delayed.