Germany is losing power

The German Central Bank (Bundesbank) stated that the economy lost momentum in the second quarter due to the impact of US tariff policy. The Bundesbank’s July economic report has been published. The report indicated that the German economy lost momentum in the second quarter, explaining that this was due to, among other factors, the expectation-driven effects on exports and industrial production due to higher US tariffs expected in the first quarter. The report noted that stronger industrial production in the January-March period and increased exports due to the expectation of higher US tariffs led to a 0.4 percent increase in German Gross Domestic Product (GDP), adding that the economy is expected to slow down again in the second quarter. The report stated that, “German economic production probably stagnated in the second quarter.” The report noted that economic sentiment indicators such as the German Business Confidence Index (IFO) have recently shown signs of recovery, yet the underlying economic trend remains generally weak. The report noted that the German export sector faces "additional headwinds from the US tariff policy" in the short term, and warned that if the US tariffs (30 percent) go into effect as threatened, this would pose a "significant downside risk" for the German economy.