Source: Sharecast
"If I could give you just one message today, it would be this: protectionism leads to welfare losses in all affected countries. There are no winners," the head of the German central bank said in a speech in Frankfurt on Monday.
For Germany, as Europe's largest exporter to the US in absolute terms, the economy would "suffer considerably" from the ramp-up of protectionist policies from Washington, Nagel said.
Germany relying heavily on its export business makes it "particularly vulnerable to falling foreign demand".
"The increased uncertainty is an additional hindrance. The devaluation of the euro could strengthen price competitiveness. But that is not enough to compensate for the negative effects," Nagel said.
Bundesbunk's economic forecasts suggest that German GDP in 2027 could be almost 1.5 percentage points lower than current estimates due to tariff increases and their economic ramifications.
Nagel also warned that protectionist measures by the Trump administration would likely have a "noticeable dampening effect" on economic activity in the US itself.
"Loss of purchasing power and increased costs for intermediate inputs outweigh any competitive advantages for US industry. Inflation would rise sharply and could be even higher without a significant tightening of monetary policy. Contrary to what the government has announced, the consequences of the tariffs for the USA should therefore be negative," Nagel said.