Bundesbank Warns US Tariffs Could Trigger Further Economic Recession

The Bundesbank has issued a warning that the tariffs proposed by the United States could lead the German economy back into recession, undermining efforts to recover from recent economic challenges. According to Bundesbank President Joachim Nagel, these tariffs, which were announced by former President Donald Trump, could result in a contraction of the German GDP this year and completely negate the anticipated growth of 0.7% for the following year.

Currently, businesses are experiencing significant uncertainty, which Nagel describes as a burden akin to a silent tax. He emphasized that any agreement regarding tariffs should not come at any cost, urging the US to avoid using economic policy as a tool that could cause widespread global damage, thereby jeopardizing overall prosperity.

The German economy had already seen slight contractions over the past two years, although there was a modest increase in GDP during the first quarter of 2025. The proposed tariffs, set at 30% on imports from the European Union starting August 1, have raised alarms among European officials.

During discussions at the G20 meeting in Durban, South Africa, German Finance Minister Lars Klingbeil acknowledged the need for a resolution, while firmly stating that no deal would be accepted at any cost. He affirmed the EU's readiness to take decisive countermeasures to protect jobs and businesses within Europe.

As the situation unfolds, the focus remains on finding a balanced approach that safeguards economic stability while addressing trade disagreements. The implications of these tariffs could resonate not just within Germany, but across the entire European economic landscape, raising concerns about potential retaliatory measures and a broader trade war.

In conclusion, the Bundesbank's assessment highlights the precarious state of global trade relations and the urgent need for collaborative efforts to ensure economic stability. Both Germany and the EU are poised to respond to protect their economic interests, as the stakes continue to rise in the evolving landscape of international trade.