U.S. tariffs could thrust Germany into recession, central bank governor says

U.S. tariffs could push Europe's largest economy into a recession, German central bank President Joachim Nagel warned Thursday, as Berlin faces a debate over the potential overhaul of its fiscal policies.

"Now we are in a world with tariffs, so we could expect maybe a recession for this year, if the tariffs are really coming," Nagel, who leads the Bundesbank and serves as a member of the Governing Council of the European Central Bank, said during a BBC podcast interview.

Global tariffs are set to exacerbate the existing symptoms of what Nagel described as Germany's "stagnating economy," which has contracted for two consecutive years amid the combined aftershocks of the Covid-19 pandemic and the energy crisis triggered by Western sanctions on Russia for its three-year invasion of Ukraine.

Mere months after inflation and interest rates began descending in the euro zone last year, returning U.S. President Donald Trump's tariff-heavy strategy, aimed at reducing his country's perceived deficits with trade partners, is rattling markets – and fracturing Europe's traditionally strong relationship with its transatlantic ally.

On Wednesday, the European Union retaliated against Trump's 25% duties on steel and aluminum imports that came into effect that day with a spate of counter-tariffs set to affect 26 billion euros ($28.26 billion) worth of U.S. goods, starting in April.

"This is not a good policy," Nagel said, bemoaning the "tectonic changes" now facing the world at large. "I hope that there is understanding within the Trump administration that the price that has to be paid is the highest on the side of the Americans."

As the world's third-largest exporter, according to 2023 data, and numbering the U.S. as the foremost importer of