German Investor Sentiment Drops Sharply Amid EU-US Tariff Deal and Economic Weakness

Germany's investor confidence has plummeted following the implementation of 15% tariffs on German goods under the EU-US trade agreement. ZEW President Achim Wambach cites the tariffs and a sluggish second-quarter performance as key drivers of the decline. The chemical, pharmaceutical, mechanical engineering, metals, and automotive sectors are among the hardest hit.

Valentin Jansen, an analyst at Nord LB, argues that the tariffs will further strain Germany's economy rather than foster recovery. "The latest trade deal with the US clearly isn't a lasting and viable solution," he said. Auto manufacturers face additional headwinds, including weak EV demand, declining Chinese sales, and heightened trade barriers.

Broader economic pressures—such as geopolitical conflicts, social-security uncertainties, and migration debates—compound the challenges. The Bundesbank's outlook remains cautious as external and internal risks persist.