In recent years, Germany has struggled with high energy costs, weaker demand from China, intensifying competition from Asian manufacturers and the lingering impact of previous US trade measures. After two consecutive years of recession, the German economy achieved only modest growth in 2025. Expectations of a stronger recovery were based on large-scale government investments in infrastructure modernization and military expansion, with the government predicting faster growth in 2026.However, those expectations have now been clouded by Trump’s warning of additional tariffs of up to 25 percent on goods from eight European countries, including Germany. The threat follows Europe’s opposition to Trump’s stated desire to assert control over Greenland, an autonomous region of Denmark. The markets reacted quickly, with stock prices falling and investors turning to safe-haven assets.
Industry groups in Germany have sounded the alarm, warning that such measures would strain transatlantic ties and harm both sides. Business associations criticized the escalation as harmful and unnecessary and stressed that political disputes should not spill over into trade. Exporters and wholesalers also expressed strong support for Denmark and underlined that democratic principles should not be undermined by economic pressure.
The renewed tensions come despite a tariff framework reached between the European Union and the United States last July, which limited tariffs on most EU exports and gave businesses more predictability. Although some critics saw the deal as unbalanced, many German companies had welcomed the stability it brought. Trump’s latest threat has now fueled fears that this hard-won security could unravel.
Small and medium-sized enterprises are considered particularly vulnerable to new tariffs because they have limited capacity to absorb higher costs or quickly reconfigure supply chains. Meanwhile, European business groups and policymakers have stressed that the EU must be prepared to respond decisively if Washington moves ahead with additional tariffs, rather than giving in to pressure. European diplomats have indicated that retaliation remains an option, and senior German lawmakers have indicated that ratification of the previous tariff deal could now be delayed. Economists warn that a prolonged escalation could eliminate measurable growth from the eurozone economy, with Germany facing a disproportionate impact due to its export exposure.
However, some analysts cited by AFP believe there is still room for de-escalation, arguing that the economic damage on both sides of the Atlantic would be significant. Trade between Germany and the United States alone is estimated at more than €250 billion per year, making an ongoing conflict costly for all involved.
The timing is particularly sensitive for Germany’s automotive sector, a cornerstone of the industrial base, which is already facing structural challenges and slowing global demand. The renewed uncertainty has raised fears that transatlantic trade tensions, once thought to be easing, could return with greater force.
The latest tariff threat marks a shift from economic rationale to overtly political motivations, increasing unpredictability for businesses. With confidence fragile and investment decisions well-balanced, Germany now faces new headwinds, just as it had hoped to turn the page on years of economic malaise.
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