German exports dropped unexpectedly in July, mainly due to weaker U.S. demand caused by new tariffs. At the same time, industrial production increased, according to data released on Monday.
Exports from Europe’s largest economy fell by 0.6% compared to June, official statistics showed. Analysts in a Reuters poll had predicted a 0.1% rise. Shipments to the United States slumped 7.9%, underlining the negative effect of U.S. import tariffs on Germany’s export-driven economy. The U.S. was Germany’s biggest trading partner in 2024, with two-way trade reaching 253 billion euros ($297 billion).
The U.S. introduced a 15% import tariff on most EU goods in July as part of a deal designed to avoid a wider trade conflict. Together, the EU and U.S. represent almost a third of global trade. Meanwhile, China also reported slower export growth in August, with shipments to the U.S. down 33% year-on-year.
Within the EU, German exports rose 2.5%, but sales to non-EU countries dropped 4.5%. Imports also declined slightly, falling by 0.1% from the previous month. Germany’s trade surplus narrowed to 14.7 billion euros, compared with 15.4 billion euros in June and 17.7 billion euros in July 2024.
Industrial Production Shows Strength
On a brighter note, German industrial output rose 1.3% in July, beating analyst expectations of a 1.0% increase. The three-month comparison, however, still showed production down 0.1% compared to the previous period.
June’s decline in industrial activity was revised to a marginal 0.1% drop, down from the initial estimate of 1.9%. The adjustment was linked to corrections from a major automotive manufacturer.
Economists see signs of hope for a recovery. Carsten Brzeski of ING noted that cyclical growth in German industry remains possible. However, data released Friday revealed that industrial orders fell for a third straight month in July, dropping by 2.9%.
Analysts at Commerzbank expect production to improve, supported by interest rate cuts from central banks and new expansionary fiscal policies by the German government. Even if August shows weaker numbers, this could be explained by late summer factory shutdowns in the auto industry rather than a deeper downturn.
