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Investing.com -- Bundesbank President Joachim Nagel warned that escalating trade tensions between the U.S. and Europe could have serious economic consequences, potentially pushing Germany into recession this year.
Speaking to the BBC, he said that while Europe’s response to U.S. tariffs was justified, a trade war would ultimately harm all parties involved.
"We are in a world with tariffs, so we could expect maybe a recession for this year, if the tariffs are really coming," Nagel told the BBC on Thursday.
German equities declined on Thursday, with the DAX index down 0.5% at 22,563.88 as of 09:06 GMT.
Germany’s central bank currently expects the economy to avoid contraction, projecting slight growth of around 0.2% in 2024—assuming no additional tariffs are imposed, he noted.
Nagel was critical of Trump’s approach, calling it "economics from the past" and "definitely not a good idea." He voiced support for the EU’s retaliatory measures after U.S. President Donald Trump imposed a 25% tariff on all foreign steel imports.
Tariffs are a key part of Trump’s economic strategy, aimed at protecting American manufacturing and jobs. However, critics argue they will drive up prices for U.S. consumers in the short term.
The EU has responded with its own countermeasures, set to take effect on April 1, targeting various American products.
While acknowledging that trade wars create "only losers," Nagel said the EU had little choice but to react. "Because if something is working against you, you can’t accept a policy like this," he said.
Still, he expressed hope that economic pressures—especially on the U.S.—could eventually lead to a different outcome. "I hope that in the end, good policy will succeed," he said.