Germany’s economy is likely to stagnate at best in 2025 after shrinking for two years and the impact of US tariffs could weigh down an already unimpressive showing, leading think tanks warned on Thursday.

Five economic institutes said in a regular update that they expect minimal growth for Europe's biggest economy of 0.1% this year- down from the 0.8% they forecast in September. They predicted growth of 1.3% in 2026.

However, they pointed to uncertainty surrounding the Trump administration’s trade policy. US tariffs on aluminium, steel and vehicle imports are likely to reduce German economic growth this year and next by 0.1 percentage points each, according to their report.

Related

The sweeping tariffs announced last week by President Donald Trump and then largely put on hold could double that hit to gross domestic product, the economists said.

However, they added that “the specific effects are difficult to quantify, as tariff rates have never been raised so sharply in the world’s current globalised economy.”

Germany’s prospective new government, which hopes to take office next month after months of political drift in the country, aims to revitalise the economy. Friedrich Merz, the likely next chancellor, and his would-be allies, presented their coalition agreement on Wednesday.