“Problems with the emission norms created severe production problems in the automotive industry, higher energy prices completely erased previous wage increases and also don’t underestimate the negative confidence effect from the World Cup,” he said.
Brzeski predicted that the automotive sector should rebound in the coming months and that lower energy prices should revamp private consumption but “the poor export performance, despite a weak euro exchange rate, suggests that trade tensions and weaknesses in emerging markets could continue to weigh on Germany’s growth performance.”
The German government expects 2018 growth to be 1.8 percent, down from an initial 2.3 percent previously forecast, but Germany’s central bank, the Bundesbank, expects growth to rebound in the final three months of the year.
Claudia Buch, the vice president of the Bundesbank, told CNBC’s Julianna Tatelbaum Wednesday that Germany’s economic issues were “really a temporary and very cyclical event and it’s related to bottlenecks in the automotive sector.”
President Donald Trump administration has delayed a decision on whether to impose tariffs on European car imports but the stay of execution might not last long. Altmaier said “we need open markets, we need multilateralism, we need lower tariffs not higher ones.”
“We are in very intense negotiations with our American partners. We want to achieve a deal. A deal would be a very strong message worldwide that this escalation can be broken, and that free and open markets can have a future.”
The Bundesbank’s Buch conceded that a potential trade conflict with the U.S. needed to be mitigated against, however.
“The downside risks have increased … because German firms depend on the integration into global value chains and for that sense they would be very affected by a potential escalation of the trade conflict,” she said.