Germany’s economy shrank for the second consecutive year in 2024, facing challenges such as high energy costs, sluggish exports, and potential U.S. tariffs under the incoming Trump administration. According to Destatis, GDP fell by 0.2%, following a 0.3% decline in 2023 - the first back-to-back contraction since 2003.
This downturn highlights the economic challenges awaiting the government after February’s elections. Once a success story, Germany’s economy has struggled since 2018, grappling with global protectionism, increased competition from China, and energy price shocks post-Ukraine war.
Industrial production in 2024 remained 15% below its 2017 peak, with the auto industry—a pillar of Germany’s economy—failing to match global advancements in EV production. Volkswagen and major suppliers like Bosch have announced job cuts, while car production remains 12% below 2019 levels.
Compounding these challenges, projects such as Intel’s chip plant in Magdeburg and a Commerzbank-UniCredit merger have faced delays or opposition. The Bundesbank projects minimal growth of 0.2% in 2025, while some forecasts predict stagnation.
Threats of new U.S. tariffs could exacerbate economic woes, potentially reducing GDP by 0.6-1.2 percentage points, according to Goldman Sachs. Protectionist policies are expected to hit Germany harder than other nations, given its reliance on exports.
Germany’s fiscal constraints further complicate recovery efforts. Chancellor Olaf Scholz’s coalition collapsed over borrowing disputes, and frontrunner Friedrich Merz of the Christian Democrats may push for pro-business reforms, including lower corporate taxes and increased defense spending.
With global crises and domestic uncertainty weighing heavily, experts emphasize the need for transformative policies to revive Germany’s industrial base and long-term growth.