The US economy may experience a steeper economic slowdown this year than Europe’s largest economy if US President Donald Trump imposes tariffs of 30% on imports from the European Union (EU), the IMK institute warned.
Germany could lose about a quarter of a percentage point in growth this year and next compared to current forecasts, the Düsseldorf-based institute said on Wednesday. That would mean zero GDP growth this year and 1.2% next year, it said.
In comparison, the US economy could drop 0.7 percentage points, primarily due to inflation and lower consumer spending, the institute said. The World Bank has forecasted that the US economy will slow to 1.4% this year, down from 2.8% in 2023.
Trump threatened in letters to the European Commission (EC) on Friday to impose tariffs of 30% on the EU if there is no progress on trade talks by the end of the month. This has raised concerns about a trade war within the world’s largest economic bloc, which could slow global economic growth by 0.5 percentage points this year.
Markets have mostly shrugged off Trump’s latest tariff threat that could impact
The German DAX 40 Index opened nearly 1% lower on Monday, at 24,038, as markets digested the risk of tariffs. The index, which has gained over 20% year-to-date so far, experienced one major correction in April when it crashed 19% and another in June, when it dropped 5.3% peak-to-trough.
German DAX 40, Source: Trading View
EU Warns of Consequences for US if Sanctions Imposed
EC President Ursula von der Leyen has signalled that the EU would defend itself against Trump’s tariffs. The EU has finalized a second list of countermeasures targeting US goods worth €72 billion ($84 billion), including Boeing Co. aircraft, automobiles, and bourbon, in the event of a potential retaliation.
“We have until the end of this month to conduct the talks,” German Chancellor Friedrich Merz said Tuesday at a news conference in Bavaria. ” Over the …