Published by Global Banking and Finance Review
Posted on April 15, 2025
By Maria Martinez
BERLIN (Reuters) - German investor morale in April posted its strongest decline since Russia invaded Ukraine in 2022 due to uncertainty unleashed by U.S. tariffs.
The economic sentiment indicator fell to -14.0 points from 51.6 points in March, the ZEW economic research institute said on Tuesday. Analysts polled by Reuters had pointed to a reading of 9.5.
The erratic changes in U.S. trade policy are weighing heavily on expectations in Germany, ZEW President Achim Wambach said.
"It is not only the consequences the announced reciprocal tariffs may have on global trade, but also the dynamics of their changes, that have massively increased global uncertainty," Wambach said.
U.S. President Donald Trump has put most of his tariffs, including a 20% duty on the European Union, on hold for three months after triggering a massive selloff in stocks, U.S. Treasuries and the U.S. dollar. Germany had been expected to be badly affected due to its export-oriented economy.
"German industry, with its strong capital goods industry, is particularly hard hit," said Thomas Gitzel, chief economist at VP Bank. The global business community is very unsettled and will postpone investments for the time being, he added.
"The external economic environment remains difficult and domestic economic momentum is weak," said Bastian Hepperle, economist at Hauck Aufhaeuser Lampe.
Germany's new coalition government unveiled economic and tax reforms last week aimed at returning Europe's largest economy to growth. But Hepperle said he saw few encouraging signals, with disputes between parties erupting even before any real work begins.
"Germany's economy looks set to remain weak," Hepperle said.
In contrast to economic sentiment, assessments of the current economic situation have slightly improved, with the corresponding indicator increasing to -81.2 points from -87.6.
The current conditions index remains low by past standards and so signals only a small rebound in German GDP after it fell in the fourth quarter, said Melanie Debono, senior Europe economist at Pantheon Macroeconomics.
"Respondents to the ZEW survey look for the German economy to fare well in the immediate future but to struggle further down the line, similar to us," Debono said.
The score, in a range from minus 100 to plus 100, is based on a survey of about 350 Germany-based financial analysts at banks, insurers and large industrial companies.
(Reporting by Rachel More and Maria Martinez, Editing by Miranda Murray and Sharon Singleton)
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