Honestly, when we think of Germany, we think of a strong economy, stable jobs, and top-tier engineering. But lately, things haven’t been looking too great. In fact, the German economy has shrunk for the second quarter in a row.

So what’s actually going on here? Why is Europe’s biggest economy stalling, and what does that mean for students, expats, and workers like us?

Let’s check out!

📉 Germany’s Economy Is Shrinking? But why?

Yep. Germany’s economy shrank by 0.1% in the second quarter of the year, and while that might not sound like a big deal, it actually is. One of the main reasons? Uncertainty. Especially around trade with the US.

Basically, businesses aren’t sure what’s going to happen with tariffs and trade deals. And when companies get nervous, they stop spending money. No big investments, no hiring, no new factories or projects. That slowdown starts to affect everything and everyone.

🚗 Are German Car Brands Like Mercedes and VW in Trouble?

You may “Big time.” Mercedes-Benz said they lost hundreds of millions because of new US tariffs. Even worse? Their profit dropped by nearly 70 percent.

Now, you’d think car companies that build their cars in the US wouldn’t be hit so hard, right? But here’s the twist, they’re still importing a lot of parts from Germany. And those parts are now slapped with 25 percent import taxes. That’s a massive hit.

Even Porsche, which sells only premium cars, took a blow. Meanwhile, Ferrari just said, “Whatever,” and raised their prices. Because if you can afford a Ferrari, you’ll probably still buy a Ferrari.

😬 Why Is “Uncertainty” Such a Big Deal?

Because it makes people freeze.
Earlier this year, importers tried to stock up before tariffs kicked in which gave Germany a temporary boost in Q1. But once the chaos began, businesses pulled back.

No new investments. No fresh hiring. No bold moves.
It’s like when you’re unsure about your next step, so you just stand still. Multiply that by thousands of companies, and you’ve got an economy that’s stuck in neutral.

💰 Is the Government Doing Anything About It?

Yes, and it’s pretty bold.
Germany’s government just rolled out a draft budget for 2026, and they’re planning to borrow more money to invest in infrastructure, defense, and digitalization.

Think better trains, faster internet, and smarter cities.
If things go as planned, we might see the benefits in the next couple of years. The idea is to spark new growth, create jobs, and help businesses get moving again.

But actually so to say; planning is easy. But Execution? Not so much. We’ll have to wait and see how much of this actually gets done.

🧱 So What’s the Bigger Problem?

Even with strong plans, Germany and the EU are still playing catch-up with the US.
Whether it’s tech, military, or innovation, Europe has been slower to adapt. Competing at that level takes a lot of money and even more political will. And right now, there’s not enough of either.

🎯 What Does This Mean for Students, Expats, and Workers in Germany?

It means we need to be a little more aware and a little more flexible.
If you’re studying or working in Germany, you might see job opportunities getting tighter, especially in traditional industries like manufacturing or automotive.

But here’s the good news, Germany is still investing. That means there will be new opportunities in tech, infrastructure, green energy, and public services. You just need to stay ahead of the curve.

💬 Stay Aware, Stay Flexible

This isn’t the end of Germany’s economic strength. Every country has its ups and downs. What really matters is how we respond and adapt.

So if you’re in Germany or planning to come, stay informed, upskill where you can, and keep your eyes on where the economy is heading next.

And if you want a simple way to stay updated without reading through boring financial reports every week, check out my YouTube channel EtaInfi.

Every Sunday, I upload a quick 5-minute video in English that covers the latest news affecting expats and students in Germany. Whether you’re already here or planning to move, it’ll help you understand how Germany is changing and how to make the most of your time here.