The asymmetrical trade agreement between the EU and the US will further worsen Germany\u2019s recession. Yet neither politicians nor corporate leaders show any willingness to make the sweeping policy changes needed to reverse course.<\/p>\n
Germany\u2019s economic data leaves no room for illusions. After contracting by 0.9% in 2023 and another 0.5% last year, the decline will continue this year.<\/p>\n
The Machine Room Has Been Blown Apart<\/p>\n
It is precisely the sectors that have sustained German prosperity for decades\u2014automobiles, construction, machinery\u2014that are under the heaviest pressure. Without the artificial boost from state spending\u2014now accounting for half of GDP\u2014the private sector is set to shrink by 4\u20135% this year.<\/p>\n
Since 2018, total productivity has been in steady decline. This is also a social problem: Germany is importing hundreds of thousands of welfare migrants into its social systems, yet the economy would have to boom just to keep per capita prosperity from falling.<\/p>\n
A new survey<\/a> by the German Chamber of Commerce and Industry (DIHK) confirms what was already obvious: the EU\u2013US trade deal will especially hurt Germany\u2019s export-oriented economy.<\/p>\n According to the survey, 58% of companies expect additional burdens, rising to 74% for firms with direct US business. Only 5% expect any benefit.<\/p>\n \u201cThis deal may have been politically necessary, but for many German companies it\u2019s a bitter pill,\u201d said DIHK CEO Helena Melnikov. \u201cHigher tariffs, more bureaucracy, falling competitiveness\u201d\u2014that\u2019s the price of the diplomatic truce between Washington and Brussels.<\/p>\n As of Thursday, a general 15% tariff applies to exports to the US, hitting automotive and machinery manufacturers hardest. 89% of US-oriented firms report immediate disadvantages, 72% fear further tariff hikes, 80% worry about political arbitrariness in transatlantic trade, and more than half plan to scale back US operations.<\/p>\n Business Was Already Weak<\/p>\n In its May survey of over 21,000 companies, only 23% reported positive business expectations\u2014down five points\u2014while 30% expected deterioration. In industry, one in three anticipates fewer orders.<\/p>\n Just 19% plan to increase investment, while about a third plan to cut back. High energy prices, labor shortages, and political uncertainty are seen as the main drags. The DIHK forecasts a 0.3% recession for 2025, but adjusting for state spending, the real decline is closer to 4\u20135%.<\/p>\n Daily surveys confirm the same message: Germany is being deindustrialized, losing hundreds of thousands of core-sector jobs. The social security deficits already emerging are just the beginning. Yet both politics and business refuse to conduct an honest diagnosis.<\/p>\n The Green Deal remains sacrosanct. Energy costs<\/a> for German industry are up to three times higher than for US competitors, double that of French firms\u2014pushing energy-intensive sectors out of the country.<\/p>\n Dancing Around the Golden Calf<\/p>\n Nobody dares openly challenge Brussels\u2019 climate agenda. A rare exception came in June, when a group of works council representatives<\/a> wrote an open letter to the Chancellor, naming the Green Deal as a root cause of decline.<\/p>\n But most CEOs dodge the question. Mercedes-Benz chief Ola K\u00e4llenius cites \u201cweak demand, high production costs, and US tariff uncertainty\u201d for falling margins\u2014but ignores the Green Deal\u2019s role. VW CEO Oliver Blume calls for lower energy prices and tax incentives for EVs\u2014essentially more subsidies to keep the transition alive.<\/p>\n Corporate leadership is now fused ideologically with the Green Deal. The energy transition has battered Germany\u2019s industrial base: sectors like construction and automotive have been knocked completely off track.<\/p>\n A Split Economy<\/p>\n