Bundesbank President Nagel: "Trump's Tariffs Could Deal a Severe Blow to the German Economy"

Bundesbank President Joachim Nagel warned that the German economy could be significantly affected by the new tariffs planned by President-elect Donald Trump. In an interview with Die Zeit on Wednesday, Nagel indicated that these tariffs could result in a 1% loss in Germany's economic output.

Facing Growth Challenges Nagel mentioned that the German economy is not expected to grow in 2024, and a growth rate of less than 1% is anticipated for 2025. He pointed out that the current economic conditions could worsen due to Trump’s tariffs, emphasizing that Germany is already undergoing a weak growth phase.

The Bundesbank President stated that job losses in the industrial sector might be difficult to balance with employment increases in the service sector. Expressing his concerns about the outlook of the labor market in Germany, Nagel noted that this imbalance in the labor market could pose a barrier to economic recovery.

ECB Interest Rates and Inflation Pressures Nagel expressed that he finds the European Central Bank's (ECB) current interest rates appropriate, noting that the ECB has lowered rates three times this year and is expected to continue making cuts at every meeting until April 2024. He mentioned that there are ongoing significant price pressures arising from wage increases in the service sector, but asserted that "we are not exaggerating" this situation.

Nagel’s warnings underscore the economic challenges that Germany and the European economy may face in the coming years. The implications of the new U.S. administration's trade policies remain a topic of curiosity.