Germany’s economic confidence weakens after Trump’s victory

The Germany’s economic confidence suffered a sharp decline in November, and analysts point to a potent combination of domestic political blockade and global uncertainties following the election of Donald Trump in the United States. Despite a brief recovery in October, the mood among Germany’s financial experts has soured once again, weighed down by the country’s long-running coalition government and Trump’s unpredictable trade agenda.

The ZEW Economic Sentiment Index, which tracks the views of up to 300 economists, bankers and industry analysts, fell to 7.1 points in Novembercompared to 13.1 in October and significantly below both expectations of 13 points and the one-year average of 25 points.

This latest ZEW reading is the second lowest level of the index in 2024. Opinions on Germany’s current economic situation have also deteriorated. The ZEW current situation index, which measures the perception of financial market experts on the current economic situation, fell 4.5 points to -91.4 points. At the same time, the Federal Statistical Office confirmed on Tuesday that the rate of German general inflation rose to 2% year-on-year in October, up from 1.6% in September and in line with previous estimates.

Eurozone outlook darkens as political and economic risks rise

Germany’s economic outlook reflects the general concerns of the eurozone. In November, the ZEW index of economic sentiment for the eurozone fell from 20.1 points in October to 12.5, below the figure of 20.1 expected by the market. Similarly, views on the current situation in the eurozone fell, with the index falling 3.0 points to -43.8.

According to Achim Wambach, President of the ZEW, Germany’s economic sentiment reflects the continued concern about political and commercial risksespecially in relation to the latest events in the United States.

“Economic expectations for Germany have been overshadowed by Trump’s victory and the collapse of the German government coalition,” Wambach said.

He added that economic sentiment in the United States is rising, while the outlook for China and the eurozone They have become more pessimistic. Wambach explained: “The outcome of the US presidential election is likely to be the main reason for this very dynamic development of economic expectations.”

Germany’s internal challenges join geopolitical tensions

Wambach highlighted that Germany’s economic challenges are exacerbated by current geopolitical tensions, and Donald Trump’s trade policies are expected to add further tension. “Trump, on the other hand, wants to introduce higher tariffs and reduce taxes for companies in the US. “This will exacerbate Europe’s economic problems, as European companies will feel even more obliged to produce in the US instead of delivering finished products there,” he said.

Wambach also stressed that Germany urgently needs promote an investment agenda and reinforce infrastructure. He insisted that mere fiscal conservatism will not solve Germany’s structural problems: “Germany urgently needs a government capable of taking measures that reduce climate policy to its efficient core,” Wambach said, advocating for a solid and focused approach to investment to ensure resilience amid growing economic headwinds.

Repercussions on the markets: Stocks and the euro fall

The German DAX index fell 0.7% on Tuesday morning, mirroring declines across all European indices, with the Euro STOXX 50 also down 0.7%. Bayer AGthe pharmaceutical and crop sciences giant, saw how its shares were plummeting more than 11% due to disappointing results and the reduction of its future forecasts.

In the euro zone, the French CAC 40 led the losseswith a drop of more than 1%. Shares in luxury companies such as Kering and LVMH fell 4.6% and 2.2% respectively, with investors wary of the Trump’s proposed trade restrictionswhich could harm European exports to key markets, including China.

Investor anxiety about the Trump administration was stoked by speculation that U.S. Senator Marco Rubio, a well-known defender of China, could be chosen as secretary of state.

Meanwhile, the euro continued its fall against the US dollarfalling 0.4% to hit a seven-month low around 1.06 levels. The single currency has lost value in seven of the last eight weeks, largely due to expectations that Trump’s trade policies could strengthen the dollar curb imports and stimulate domestic growth.