Germany and France Return to Growth But Tariff Pain Yet to Hit

1w[d3le(gl5qt7cxud8tkk[l_media_dl_1.png Eurostat, Destatis, Insee, Istat

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(Bloomberg) — The German and French economies returned to growth at the start of the year but face more challenging times ahead as the damage from US trade levies is fully felt.

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Germany’s first-quarter gross domestic product rose 0.2% from the previous three months, the statistics office said. That followed a decline of that size between October and December 2024 and was in line with a Bloomberg survey of analysts.

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French output edged up by 0.1% — in line with expectations — thanks to a boost in inventories. Italy saw a bigger-than-anticipated increase of 0.3%.

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There were upbeat numbers across the euro zone this week: First-quarter estimates for Spain, Belgium, Austria, Finland and Lithuania put GDP up between 0.1% and 0.6%. Ireland’s reading — distorted by its role as a tax base for US multinationals — jumped 3.2%. The 20-nation bloc is expected to report unchanged growth of 0.2% later Wednesday.

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But such assessments of Europe’s economic health offer little insight into the impact of President Donald Trump’s tariffs, the bulk of which were only announced on April 2. European Central Bank officials reckon the levies — many of which are now paused pending the outcome of negotiations — will curb growth and weigh on consumer prices, at least in the near term.

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Separate figures showed how France’s sluggish economy is already dragging down inflation, which eased to 0.8% in April from 0.9% the previous month. That’s the lowest reading since February 2021 and will support calls for more ECB interest-rate cuts.

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For Germany, the positive GDP number is a plus for incoming Chancellor Friedrich Merz after the International Monetary Fund predicted Europe’s largest economy would stagnate this year. Bundesbank President Joachim Nagel has even warned of a third straight year of contraction due to the fallout from Trump’s trade policies, such as levies on cars.

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Germany has been suffering for several years from flimsy global demand, the cutoff of Russian energy supplies, over-regulation and a dearth of skilled workers. There’s hope longer term, though, thanks to plans by the new government to spend hundreds of millions of euros on beefing up defense and infrastructure.