Key events
Bundesbank chief warns US tariffs could tip Germany into recession
Donald Trump’s trade policies could tip Germany, Europe’s largest economy, into another recession, the president of the country’s central bank warns.
The Germany economy has shrunk in the past two years and with US tariffs, the country “could expect a recession for this year” too, Joachim Nagel, the head of the Deutsche Bundesbank, told the BBC World Service.
Without the impact of tariffs, the bank forecasts the German economy will grow moderately, by about 0.2%, he said.
Nagel said “there are only losers” when it comes to tariffs, and backed the EU’s countermeasures against Trump’s 25% levy on all steel and aluminium imports from overseas imposed yesterday.
Tariffs are a key part of the US president’s economic vision as he hopes they will boost US manufacturing and protect jobs, but economists say they will push up prices for US consumers.
Nagel called Trump’s tariff policy “economics from the past” and “definitely not a good idea”.
The EU announced countertariffs on a range of goods from 1 April. Nagel expressed hope that when the US realises that the price that needs to be paid will be “highest on the side of the Americans”, it will give an opportunity for both sides to come to a different resolution.
“I hope that in the end, good policy will succeed,” he said.
Germany is hugely reliant on exports, and its cars such as BMW, Mercedes, Volkswagen and Audi are popular in the US.
Nagel rejected claims that Germany was the “sick man of Europe”, saying it had a “strong economic basis” and “strong small and medium sized companies”.
But nevertheless, when you are exposed to an export-oriented model, then you are more exposed in a situation when tariffs are going up and there are so many uncertainties, so many unknowns.
The head of Germany’s BGA federation of wholesale, foreign trade and service, Dirk Jandura, warned yesterday that Germans might have to pay more for American products, such as orange juice, bourbon and peanut butter, in supermarkets.
Later today, the German parliament will debate proposals to loosen its controversial debt brake to allow higher defence spending and to set up a €500bn infrastructure fund, which would be a major fiscal shift.
Nagel said it was an “extraordinary measure” for an “extraordinary time”.
The whole world is facing tectonic changes which makes the current situation very different from those seen in the past, hence the fiscal change.
He said the policy change would give Germany some financial breathing room for recovery in the next few years, adding it provided a “stability signal to the market”.
Introduction: John Lewis staff miss out on bonus despite profits jump; Britain’s housing market loses steam
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Despite tripling full-year profits, the John Lewis Partnership has decided not to pay a staff bonus for the third year in a row.
The owner of John Lewis and Waitrose, which is in the middle of a turnaround plan, reported a profit of £126m, with sales up 3% to £12.8bn in the year to 25 January. It has closed 16 department stores and at least 20 Waitrose outlets and cut thousands of jobs at head office.
The retailer said it is prioritising investment over the bonus with plans to spend £600m on transforming the business.
Jason Tarry, chairman of the John Lewis Partnership, said:
These are solid results, which show that our customers are responding well to our investments in quality products, value and service. We have made good progress with much more still to do.
The retailer, which employed about 69,000 people last year, has now skipped the bonus to workers in four out of the last five years, after diving to a loss during the Covid pandemic when it was forced to close stores during lockdowns.
Britain’s housing market had its slowest month in more than a year in February as a rush of buyers to complete before a tax break deadline ran out of steam.
The monthly survey from the Royal Institution of Chartered Surveyors showed buyer demand was weakest since November 2023, with a further slowdown expected in the months ahead.
The volume of newly-agreed sales fell in February, with London-based professionals reporting a particularly noticeable dip in sales agreed during the month.
Higher stamp duty costs for some home-buyers from 1 April are expected to dampen market activity. Stamp duty applies in England and Northern Ireland.
The net balance of house prices, which measures the difference between surveyors reporting a rise and a fall, dropped to +11, down from January’s +21 and a two-year high of +25 in December, and the lowest since September. However, a net balance of 47% expect property values to increase in the next 12 months.
The housing market had picked up in previous months, boosted by lower mortgage rates and expectations of Bank of England interest rate cuts.
RICS chief economist Simon Rubinson said:
The UK housing market appears to be losing some momentum as the expiry of the temporary increase in stamp duty thresholds approaches.
Some concerns are also being expressed by respondents about the re-emergence of inflationary pressures and the more uncertain geopolitical environment. That said, looking beyond the next few months, sales activity is seen as likely to resume an upward trend with prices also moving higher.
Turning to the rental market, he said:
Meanwhile, despite a flatter trend in demand for private rental properties, the key RICS metric capturing rental expectations is still pointing to further increases, demonstrating that the challenge around supply spans all tenures.
Sarah Coles, head of personal finance at Hargreaves Lansdown, explained:
The window of opportunity has effectively slammed shut on buyers, because even in February they knew there was next-to-no chance of getting a sale sorted before the end of the stamp duty holiday.
Unsurprisingly, it has sucked some of the life out of the market. House prices have continued to rise, but not as quickly, and agents are fairly convinced we’ll be in this lull for a while yet.
Asian stock markets are in the red, as optimism over cooling US inflation gave way to worries about the economic impact of Donald Trump’s trade tariffs. Japan’s Nikkei gave up earlier gains to dip slightly while Hong Kong’s Hang Seng was down by 0.7% and the Shenzhen exchange in China lost nearly 1%.
Stock futures are suggesting a lower open in Europe and on Wall Street later.
Gold rose by 0.5% as high as $2,947.06, approaching a record high hit on 24 February of $2,956.15.
The Agenda
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10am GMT: Eurozone industrial production for January
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12.30pm GMT: US Producer prices for February; initial jobless claims for week of 8 March
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11am GMT: German parliament to debate borrowing bonanza
