Slowing economic growth in Germany is being warned of the Munich-based Ifo Institute, particularly if the European Union responds to US tariffs by implementing its own duties on American goods. During a discussion with “Bild am Sonntag” Ifo President Clemens Fuest cautioned that should this escalate into a new trade war, Germany faces the risk of a recession as early as 2026.
The tension stems from US President Donald Trump’s announcement of new punitive tariffs on the European Union. Specifically, he plans to raise the tax on imported cars and trucks from EU exports into the US from 15% to 25%, with this new rate scheduled to take effect next week.
Ifo President Fuest pointed out that these proposed tax increases would heavily impact the German automotive industry, which is already struggling. Professor Jens Südekum, an advisor at the German Ministry of Finance, offered advice to Brussels, suggesting that the EU prepare “appropriate countermeasures” should the tariffs go through. Additionally, he advised that the EU should initially wait and observe whether the elevated US tariffs are actually implemented.