US tariffs pose 'significant risks' to economy, says German central bank chief

FRANKFURT - The German Bundesbank President Joachim Nagel, warned on Monday that US tariffs would have a particular impact on Germany, posing "significant risks" to the country's economic growth.

Speaking at the Speaker's Luncheon of the Union International Club in Frankfurt, Nagel stressed that as an export-driven economy, Germany will suffer substantial losses due to the shift in US trade policy.

Referring to US President Donald Trump's imposition of 25-percent tariffs on steel and aluminum, Nagel noted that this move would particularly impact Germany, posing a threat to its economic outlook.

Citing projections from Germany's central bank, Nagel warned that escalating transatlantic trade tensions could lead to Germany's economic output in 2027 being 1.5 percentage points lower than expected. He also cautioned that inflation could rise, although the exact impact remains uncertain.

The Bundesbank chief further highlighted that increased tariffs risk creating a "self-inflicted economic headwind" that might not only weaken Germany's economy but also undermine America's own growth prospects while disrupting global supply chains.

"The erosion of purchasing power and the surge in input costs would far outweigh any potential competitive advantages for US industries," he said. "The inflation rate would rise sharply and could climb even higher without a significant tightening of monetary policy."

Contrary to the US administration's claims, Nagel asserted that tariffs would likely have negative consequences for the United States as well.

"Protectionism leads to welfare losses in all affected countries. There are no winners," Nagel concluded, reaffirming his commitment to advocating for an open and rules-based trading system.