Bundesbank Bd Member Köhler-Geib: 20% Tariff Would Lead to Noticeably Weaker Growth in Germany

26 March 2025

By David Barwick – FRANKFURT (Econostream) – A tariff of 20% on European exports to the US would likely result in clearly lower German economic growth, with the inflation impact harder to assess, according to Deutsche Bundesbank Board member Fritzi Köhler-Geib on Wednesday.

In a speech at an economic forum in Ingelheim, Germany, Köhler Geib said that the Governing Council’s intention to make data-dependent decisions on a meeting-by-meeting basis ‘seems sensible in the current situation.’

US tariff policy was one element justifying this approach, she said, with very disparate consequences from possible tariffs, depending on details including the European reaction.

A Bundesbank simulation indicated that ‘[i]n the event of a general US tariff increase of 20pp and a moderate counter-reaction, noticeable growth losses can be expected: especially in the US, but also here in Germany’, she said.

‘It is more difficult to predict how an escalating trade conflict will affect inflation in Germany: relatively minor or significantly noticeable’, she continued. ‘In any case, the inflation risk should not be underestimated. And so potential tariffs are just one factor currently complicating forecasts.’

The outlook for the German economy this year was still ‘bleak’, she said. Despite likely marginal growth in 1Q, ‘the economy could stagnate again as early as the second quarter.’

Not until next year would growth rates top the long-term trend, she said, even though the latter was estimated at a mere 0.4%.