Leading German institute chief warns of recession due to US tariffs

The president of a leading think tank has warned of significant risks to the German economy amid the threat of new US tariffs.

Clemens Fuest, president of the Munich-based ifo Institute, fears serious consequences should the European Union retaliate to tariffs recently announced by US President Donald Trump.

"If this turns into a new trade war, Germany faces a recession in 2026," Fuest told the Bild newspaper in comments published on Sunday.

Trump said on Friday he will raise tariffs on cars and trucks imported from the EU to 25% starting next week, accusing the bloc of failing to comply with a trade agreement and escalating a long-running trans-Atlantic trade dispute.

Fuest said that the planned tariff increases would hit the German automotive industry at a time when it was already facing difficulties. 

In August 2025, Trump and European Commission President Ursula von der Leyen agreed on a framework capping tariffs on most EU imports, including cars and car parts, at 15%.

The US remains a key export market for German carmakers such as Porsche, BMW and Mercedes-Benz.