Could U.S. tariffs cause a recession in Germany?

Summary

Marketplace Morning Report: Could U.S. Tariffs Cause a Recession in Germany? Release Date: March 13, 2025

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Introduction

On March 13, 2025, Marketplace's "Morning Report" delved into the pressing economic concerns surrounding the impact of U.S. tariffs on Germany's economy. Hosted by Liana Byrne and featuring insights from key economic figures and global news updates, the episode provided a comprehensive overview of the intertwined nature of international trade, economic policies, and geopolitical dynamics.

U.S. Tariffs and Germany's Economic Outlook

The episode opened with a critical analysis of how recent U.S. tariffs could potentially drive Germany into a recession. Joachim Nagel, the President of the Bundesbank (Germany's Central Bank), expressed his concerns regarding the newly imposed tariffs.

Joachim Nagel [01:05]: "I think we are living in a stagnating economy... we could expect maybe a recession for this year. The terrorists are really coming. So it is a challenging situation."

Nagel highlighted that Germany's economy had already experienced two consecutive years of contraction. He strongly criticized the U.S. tariffs, emphasizing that they only lead to winners and losers, with Germany being on the losing end.

Joachim Nagel [01:35]: "The European Union had to react because if something is working against you, you can't accept a policy like this... there is room to maneuver again and stop this. I think this is not a good policy."

Without the burden of tariffs, Germany's economy was projected to grow modestly by approximately 0.2%. However, with the imposition of President Trump's 25% tariff on steel imports, the outlook became bleak, signaling a potential recession within the year.

Market Reactions and Economic Indicators

The report transitioned to current market trends, noting a decline in European stocks and U.S. futures. This downturn was attributed to fears of an escalating global trade war and softer-than-expected U.S. inflation data.

• Germany's DAX: Down by 2.10%
• France's CAC 40: Flat

Additionally, significant developments in the cryptocurrency sector were highlighted, including a $2 billion investment by Abu Dhabi-backed MGX in Binance, marking one of the largest institutional investments in the industry.

Global Regulatory Actions and Tech Concerns

The episode also covered Albania's enforcement of a one-year ban on TikTok, initiated by Prime Minister Edi Rama. The ban was a response to concerns over the platform's failure to protect underage users, citing a tragic incident where a teenager's dispute on TikTok escalated into real-life violence. This regulatory move faced criticism from the journalists' association, which argued that it infringed upon freedom of expression and planned to challenge the decision at the Constitutional Court.

U.S. Military Aid to Ukraine and the Mineral Deal

A significant portion of the report focused on the renewed U.S. military aid and intelligence support to Ukraine. This assistance is pivotal in facilitating a multi-billion dollar mineral deal between the two nations, granting the U.S. access to Ukraine's abundant natural resources, including rare minerals essential for technology and defense industries.

James Waterhouse from the BBC provided an on-the-ground perspective from a graphite mine in central Ukraine:

James Waterhouse [03:49]: "To the left there is a broad spectrum of browns, mustard, clay, rust... Kyiv is willing to sign a deal with Washington that could unlock billions of dollars worth of profits for both."

The graphite quarry in Ukraine, Europe's largest, holds 7 million tons of graphite ore, vital for lithium batteries used in electric vehicles and other technologies. However, the site faces operational challenges due to limited funding for development, which is crucial for efficient extraction and processing.

IHO Semko [05:08]: "If the Americans were to invest in a 50-50 partnership, it would be beneficial. There would be new jobs, salaries for workers and income for the owners."

Despite the potential economic benefits, security guarantees remain elusive, as the agreement leans more towards economic collaboration than military support. Experts suggest that foreign investment could alleviate financial constraints, fostering development and operational sustainability.

Technological Investments and Consumer Trends

In the realm of technology and consumer behavior, the report highlighted Saudi Arabia's Public Investment Fund's substantial investment of $3.5 billion in Niantic's gaming division, the creators of Pokémon Go. Nearly a decade after its launch, Pokémon Go continues to be one of the highest-grossing mobile games globally, maintaining a robust player base of 30 million monthly users.

Conclusion

The episode concluded by emphasizing the interconnectedness of global economies and the far-reaching implications of trade policies. With Germany's economy teetering on the brink of recession due to U.S. tariffs, and significant moves in technology investments and geopolitical alliances, the Marketplace Morning Report underscored the importance of informed economic strategies and international cooperation in navigating the complexities of the modern economic landscape.

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Note: Advertisements and non-content sections from the transcript have been omitted to focus solely on the informational content of the episode.

Transcript

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[Liana Byrne]

Could US tariffs push Germany into another recession? Well, that's what Germany's central bank chief is warning. Live from the UK this is the Marketplace Morning report from the BBC World Service. I'm Liana Byrne. Good morning. Germany's economy, Europe's biggest, has already shrunk two years in a row. And now new tariffs from the US could make things even worse. Joachim Nagel, president of the Bundesbank, tells the BBC that President Trump's 25% tariff on steel imports means Germany could expect another recession this year.

[Joachim Nagel]

I think we are living in a stagnating economy. The forecast of my institution, Deutsche Bundesbank is for this year economic growth by around 0.2%. So this is not good, but this is with our tariffs. Now we are in a world with terrorists, so we could expect maybe a recession for this year. The terrorists are really coming. So it is a challenging situation. So the timing for all this is definitely, this is not a good timing.

[Liana Byrne]

Now, without tariffs, Germany's economy isn't exactly booming, but it is forecast to edge slightly upward, growing about 0.2%. Nagel strongly opposes tariffs, saying they create only losers, and backs the European Union's plan to retaliate.

[Joachim Nagel]

The European Union had to react because if something is working against you, you can't accept a policy like this. So I think this was rational behavior. But now we shouldn't close maybe the doors. So we have to talk to each other. And I hope that there is the understanding within the Trump administration that the price that has to be paid is the highest on the side of the Americans. And if that lesson is learned and understood, I believe then there is room to maneuver again and, and stop this. I think this is, this is not a good policy.

[Liana Byrne]

That was Joachim Nagel, president of the Bundesbank. Now let's do the numbers. European stocks and US Futures slipped this morning as worries about an escalating global trade war overshadowed yesterday's rally and softer than expected US inflation data. Germany's DAX is down 2,10 of a percent. And France's CAC 40 is flat. Meanwhile, in a landmark crypto deal, Abu Dhabi backed MGX invested $2 billion in Binance, marking one of the largest institutional investments ever made in the cryptocurrency sector. Albania's one year ban on TikTok comes into effect today. Prime Minister Edi Rama has accused the social network of failing to safeguard underage users, citing an incident last year in which a teenager died after a dispute on TikTok escalated into real life violence. The journalists association there says the measure violates freedom expression and that it will complain to the Constitutional Court. Now America is once again sending military aid and intelligence support to Ukraine. And that might unlock a multi billion dollar mineral deal between the two countries. The agreement would grant the US access to Ukraine's extensive natural resources, including rare minerals crucial for technology and defense. But what's Ukraine getting out of this deal? The BBC's James Waterhouse investigates from an inside a graphite mine in central Ukraine.

[James Waterhouse]

It is what happens in the trenches that will always determine the outcome of this war. But a lasting peace for Ukraine could be unearthed here in this vast canyon, this quarry in central Ukraine. To the left there is a broad spectrum of browns, mustard, clay, rust. And to the right there are big iron diggers parked next to 7 million tons of graphite ore. President Zelenskyy suggested offering up natural minerals like this as part of a peace deal. But he could not have anticipated a Trump administration as hostile as this. This man made canyon is the byproduct of 61 years of mining. It's the biggest graphite quarry in Europe. As the remnants of winter melt away, there are 7 million tons of graphite ore left, or 12 years more work. But extracting it costs money and this site is running out. It's why the heavy steel of these Soviet era diggers are dormant for 11 months of the year. It's also why Kyiv is willing to sign a deal with Washington that could unlock billions of dollars worth of profits for both.

[IHO Semko]

Currently, Europe and America are transitioning to electric vehicles and similar technologies requiring high quality graphite. This graphite is intended for use in lithium batteries.

[James Waterhouse]

IHO Semko runs the site and tells me 70% of Ukraine's critical minerals are still underground.

[IHO Semko]

If the Americans were to invest in a 5050 partnership, it would be beneficial. There would be new jobs, salaries for workers and income for the owners.

[James Waterhouse]

The graphite ore is taken to this industrial ghost town, this collection of buildings where it's processed and turned into graphite. At its height, this site produced up to 60,000 tons of graphite per month. It's now around 5,000. Kyiv pitched its potential mineral wealth to the US to get security guarantees in return, but the White House hasn't offered any. But Ukraine and Europe's continued reliance on America's military might is forcing it to agree.

[Unnamed Expert]

Regardless, the private owners say there is no money for development. For the factory to operate, the quarry must be developed.

[James Waterhouse]

Valeri, the chief engineer here, would welcome any cash injection.

[Unnamed Expert]

Security guarantees are unlikely, as this agreement is more economic than military, but if foreign companies are involved, those territories might be left alone.

[James Waterhouse]

It could take decades for the US and Ukraine to make a profit. But right now, this is a country that needs more than just money. It needs an America on its side against Russia in Ukraine. I I'm the BBC's James Waterhouse for Marketplace.

[Liana Byrne]

And finally, Saudi Arabia's Public Investment Fund is catching them all and paying three and a half billion dollars from Niantic's gaming division, the creators of Pokemon Go. Almost a decade after its launch, Pokemon Go remains one of the highest grossing mobile games worldwide, attracting 30 million monthly players. I'm Liana Byrne with the Marketplace Morning Report from the BBC World Service.

[Janelie Espinal]

Consumer confidence had its sharpest monthly decline since 2021, which means we're all in our feels about money. And while uncertainty is the only constant these days, it's also a great reason to get serious about understanding personal finance. I'm Janelie Espinal, host of Financially Inclined, a podcast from Marketplace that makes learning about money simple. Learn about practical skills like negotiating job offers, dealing with money and friendship and love, entrepreneurship and student loans. Get serious about your money and build a life you've always dreamed of. Listen to Financially Inclined wherever you get your podcasts.