Merz: US tariffs have badly damaged the German economy
Chancellor Friedrich Merz says US tariffs have badly damaged Germany's economy, as Q2 GDP contracts 0.3% and exports slide under the new 15% tariff regime.
German Chancellor Friedrich Merz says US tariffs have badly damaged the German economy, adding to pressure on Berlin as Europe’s largest economy struggles to regain momentum. The comments follow fresh data showing a deeper-than-expected contraction tied directly to weaker exports.
What Merz said
Merz has argued that the 15% tariff arrangement with Washington fell short of what Berlin had hoped for in negotiations. He commented on the new trade restrictions and admitted that the negotiations with the United States had not led to the expected result, saying he was not satisfied with the outcome and that it was clearly impossible to achieve more based on the initial conditions.
Merz said the German economy will suffer significant damage due to these tariffs, and that the continuation of the 15% tariffs would put serious pressure on Germany’s export-oriented economy.
The data backs him up
Germany’s economy shrank more than expected in the second quarter as U.S. tariffs battered exports, with GDP falling 0.3% from the previous quarter, a downward revision of the earlier 0.1% decline estimate.
Goods exports fell 0.6% and spending on machinery and equipment dropped 1.9%, highlighting the difficulties faced by the country’s manufacturers in the first full quarter after increased U.S. tariffs took effect. The United States is Germany’s largest trade partner, taking about 10% of its exports, and a key destination for products from cars to chemicals.
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Why this matters for markets
Germany is the industrial engine of the eurozone, and a sustained hit to exports feeds directly into DAX earnings, autos, chemicals, and industrial capex across Europe. Fixing the eurozone’s traditional export powerhouse has been a priority for Merz, with the economy battered in recent years by high energy costs and fierce Chinese competition.
ING bank analyst Carsten Brzeski said the data suggested that increased optimism was not the start of a durable upswing but rather tied to earlier front-loading ahead of tariffs — meaning the drag could persist into the back half of the year.
Options market and stocks to watch
US-listed names with heavy German industrial or auto exposure are the cleanest read-throughs here. Watch for reaction in:
VWAGY: Volkswagen ADR — direct exposure to auto tariffs and European export weakness.
MBGAF: Mercedes-Benz Group — a bellwether for German premium auto shipments into the US.
BMWYY: BMW ADR — US plants help, but the tariff headline still weighs on sentiment.
SAP: Largest German listing in the US; watch for spillover if broader German risk sentiment sours.
EWG: The Germany ETF, a clean proxy for how traders are positioning around the tariff drag. Check other market news for updates as Berlin responds.
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