BERLIN, Dec. 11 (Xinhua) -- Germany is facing a stronger-than-expected drag from U.S. tariff hikes, several leading research institutes said Thursday. They now project the economy to grow by only 0.1 percent in 2025, 0.1 percentage points lower than their autumn forecast.
According to the ifo's Economic Forecast Winter 2025 and the Kiel Institute's Winter Forecast, the downgrade reflects a sharper drop in exports to the United States following tariff increases, as well as the limited impact of Berlin's fiscal measures, including a multi-billion-euro infrastructure fund unveiled earlier this year.
Germany's overall exports are forecast to fall 0.2 percent in 2025, with shipments to the United States recording a particularly steep decline, the Kiel Institute for the World Economy said, citing tariff-driven trade disputes and the erosion of Germany's competitiveness.
Domestically, the economy is in the midst of a far-reaching structural transformation. The federal government's fiscal package, comprising the infrastructure fund and a significant rise in defense spending, had initially buoyed business sentiment. But confidence has faded again toward year-end as the promised stimulus has yet to materialize.
Economic policy decisions taken so far are likely to provide only a brief lift to activity and offer no impetus for higher potential output or faster potential growth, the ifo Institute said, adding that higher U.S. tariffs are further weighing on German industry.
Following a reassessment of output prospects, ifo now expects Europe's largest economy to grow 0.8 percent in 2026 and 1.1 percent in 2027, with both figures lowered by 0.5 percentage points from its autumn forecast.
Since their spring projections, these institutes have repeatedly cut their growth estimates in response to U.S. tariff measures. With the export sector under heavy strain, quarterly gross domestic product contracted by 0.2 percent in the second quarter after a 0.3-percent rise at the start of the year, before a stagnation in the third.
"Even for the end of the year, no noticeable turnaround is in sight," the Leibniz Institute for Economic Research noted.
