German investor sentiment plunges most since 2022 on trade jitters

German economic sentiment took a major hit in April as the ZEW Indicator plunged by 65.6 points to minus 14.0, its sharpest decline since the Ukraine war erupted in 2022.

This steep drop reflects rising pessimism among financial market experts, driven by mounting uncertainty over erratic US trade policies and the looming threat of reciprocal tariffs.

While perceptions of Germany’s current economic situation showed a modest uptick—improving by 6.4 points to minus 81.2—the overall sentiment remains profoundly negative.

ZEW President Achim Wambach pointed to the disruptive impact of US trade policy shifts, particularly on export-heavy sectors like automotive, chemicals, and mechanical engineering.

“The erratic changes in the US trade policy are weighing heavily on expectations in Germany, which have sharply declined. It is not only the consequences the announced reciprocal tariffs may have on global trade, but also the dynamics of their changes, that have massively increased global uncertainty. The economic expectations for Germany and the Eurozone reflect this development,” said Wambach.

The sentiment in the broader eurozone also deteriorated, with its indicator falling by 58.3 points to minus 18.5, and current economic assessments dipping to minus 50.9.

Despite these challenges, inflation risks are seen as contained, potentially allowing the European Central Bank some leeway for rate cuts to support growth. However, opinions are split on whether the US Federal Reserve might adopt a similar easing stance.

Attribution: Amwal Al Ghad English

Subediting: Y.Yasser