Germany’s economy fell back into recessionary territory in the second quarter, as the positive frontloading effects in the early part of the year was undone by “the first full-blown impact of U.S. tariffs,” ING’s Carsten Brzeski said.
GDP fell by 0.1%, swinging from the 0.3% growth in the first quarter, defying optimism from surveys. The stronger euro makes it unlikely that exports could soon drive the German economy, putting all hopes on the government’s fiscal stimulus, corporate investments and innovation to bring back growth, Brzeski said in a note.
In addition, despite some clarity from the EU-U.S. trade agreement, there are still many things that could go wrong, bringing back tariff escalation, he said.