New US tariff threats over Greenland could derail Germany’s modest economic rebound, with experts warning of severe damage to exports and growth.
FRANKFURT: US President Donald Trump’s latest tariff threat against Europe over Greenland has struck Germany just as hopes grow for a modest recovery after years of stagnation.
The government and export-reliant businesses were blindsided by Trump’s weekend threat of tariffs up to 25% on products from eight European nations, including Germany.
“For Germany, these new tariffs would be absolute poison,” ING economist Carsten Brzeski told AFP, adding the uncertainties “clearly jeopardise the fragile recovery underway”.
Germany achieved just 0.2% GDP growth in 2025 after two years of recession, ailing from high energy prices and falling Chinese demand.
Huge public spending on defence and infrastructure had boosted hopes for a stronger 2026 rebound, with the government predicting 1.3% GDP expansion.
The news rattled German companies and provoked a mix of puzzlement and anger, driving down stocks and lifting safe-haven assets like gold.
“Greenland is taking this madness to extremes,” said Thorsten Bauer, co-head of laser maker Xiton Photonics, expressing a sentiment shared by many business leaders.
The Federation of German Industries denounced “an inappropriate and damaging escalation for all parties” putting “enormous pressure on transatlantic relations”.
The German Association of Wholesalers, Exporters and Service Providers slammed the threat as “grotesque” and stressed defiantly it continues to stand by Denmark.
Trump’s latest salvo comes after the EU and US agreed last July to cap tariffs on most EU exports at 15%, with most US goods entering tariff-free.
The German Association of Small and Medium-sized Businesses said its members had waited patiently during last summer’s tariffs debate.
“Donald Trump’s erratic policies are poison for the global economy and free trade – and they damage trust that has been built up over years in rules-based systems,” the group told AFP.
It said new tariffs would particularly hurt German SMEs but insisted “Europe must not allow itself to be blackmailed”.
European diplomats have promised a firm response if Trump makes good on his threat, with influential German MEP Manfred Weber saying ratification of the July deal is now “on ice”.
Some experts hope all sides will step back from an escalation that would hurt everyone, threatening US-German trade worth over €250 billion.
If implemented long-term, new tariffs “could cost the eurozone economy something between 0.2% and 0.5% of GDP, with a bigger hit for Germany,” wrote Andrew Kenningham of Capital Economics.
The uncertainty comes at a tough time for Germany’s crucial auto sector, which is bracing for resurgent transatlantic trade tensions.
Automotive analyst Pal Skirta of Metzler Bank told AFP this threat is worse news than last year’s tariffs.
“The Liberation Day tariffs were maybe not very reasonable, but you could justify them,” he said, adding “With Greenland, it comes out of the blue, you can’t justify it by macroeconomic logic.”
He stated this is “the last and most evident proof point that the tariffs are completely driven by politics, not by economics,” noting uncertainty has spiked to a much greater level.
