The Mood Shifts: US Tariffs Dampen Hope of an Upturn

The latest report from the German Business Panel (GBP) paints a mixed picture of the German economy: While the coalition agreement presented by CDU/CSU and SPD leads to cautious optimism among many companies, the US tariffs announced at the beginning of April are weighing heavily on business expectations, especially in export-oriented industries.

Since the collapse of the governing coalition in November 2024, companies in Germany have seen a steady decline in expected business closures: The proportion of companies that expect to continue their business activities in the next twelve months rose from 82.1% in October 2024 to 87.0% in March 2025. The background to this development is the coalition agreement between CDU/CSU and SPD presented on 9 April 2025, which contains a number of economic policy incentives. The new government plans immediate write-offs for investments, to gradually reduce the corporate income tax, and to introduce an industry price for electricity which applies to energy-intensive companies. In the immediate run-up to the coalition agreement, forecasts for sales (+1.2 percentage points), profits (+1.9), and investments (+3.1) rose significantly.

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