BERLIN — Germany’s postwar economy was built for export, but now it’s taking a sizable hit.
U.S. tariffs imposed by President Donald Trump are hurting the sales of the cars and machinery that previously made Germany the most powerful economy in the European Union. Chinese manufacturing competitors are outpacing German companies. And with energy costs rising because of the Iran war, economic analysts and German officials fear the country could slip into a recession.
Feeling the economic strain, some German voters are turning to the political fringes for candidates who promise change, while the country’s leaders — including German Chancellor Friedrich Merz — work to prove they can turn the economy around.
“We’ve seen a longer period of barely any economic growth for a couple of years,” said Melanie Vogelbach, head of international economic policy at the German Chamber of Commerce and Industry.
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Vogelbach called for the German government to address increasing regulatory bureaucracy, an aging population and the rising costs of labor and energy to jump-start the stagnated economy.
“We do have to remember that we do have a lot of structural problems at home that are not necessarily only related to international developments,” Vogelbach said, pointing to high costs, heavy tax burdens and what she called “excessive bureaucracy” that slows down projects and permitting.
As one of the biggest exporters of automotive and manufacturing globally, Germany faces particularly acute economic problems. The Kiel Institute for the World Economy estimated that automotive and manufacturing tariffs levied by the United States could cost the German economy billions in output in the short term.
Experts say the effects of a worsening economy in Germany reveal how much European economies depend on U.S. cooperation. U.S. tariffs have significantly affected German exports, with most German goods facing a 15% baseline tariff, while steel and aluminum are subject to a 50% levy.
The issue came to a head this week when the European Commission president, Ursula von der Leyen, addressed issues with the United States. Speaking to the European Parliament on Wednesday, she said transatlantic relationships faced a “fracture in the international rules-based system.” Von der Leyen also proposed the EU expand its trade agreement with Canada and potentially make it the first associate member of the bloc.
Trump responded by threatening to levy “very serious tariffs or stop trading with Europe.”
He added: “If it’s a good intention, that’s fine. If it’s a bad intention, we’ll put very heavy tariffs on Europe.”
The German chancellor unveiled a sweeping economic reform package called “Programme for Revival and Employment” on July 2 that aimed to resuscitate Germany’s economy by easing bureaucratic burdens and boosting labor market competitiveness. As Germans go to the polls in the coming months, it remains an open question if Merz will emerge with a governing coalition that could pass the economic package.
The stagnant economy appears to be spurring German voters to turn toward far-right parties, such as Alternative for Germany, to solve rising costs, decreasing job opportunities and the slowdown in economic growth.
“When you are worried about your future, when you’re worried about having your job in the future, that is something that mostly triggers you or makes you at least open to vote extreme, maybe out of protest,” Simon Schütz, a spokesperson for the German Association of the Automotive Industry, told the Washington Sun.
He added: “If you don’t take those tough decisions now, you might have to take much tougher decisions in some time. The goal is to work together to make the business model in Germany fit for the future once again. Only in this way will we be able to continue manufacturing here. And only in this way can we safeguard jobs.”
Rolf J. Langhammer, a researcher at the Kiel Institute, placed China’s rise in economic power within a broader list of pressures facing Germany: an aging population, lagging digitalization and artificial intelligence adoption relative to the U.S. and China, as well as an incomplete shift to renewable energy.
“Germany, and also the European Union, but Germany in particular, is an aging economy which has profound changes in its production structure, in its demand structure,’ he said.
Schütz framed the tariffs as one more strain on an automotive industry already losing its competitive footing.
“When you look at certain location-side factors such as energy prices, bureaucracy, taxes, regulation — all of this, Europe has kind of lost its base, and other regions went ahead of it,” Schütz said.
Langhammer said German lawmakers and officials must figure out how to move forward without relying on the United States.
“Europe must become economically more independent,” Langhammer said, “and rely on its own strength.”
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