German exports grew at the fastest pace in four months in February, driven by heightened U.S. demand in anticipation of tariffs by the Trump administration, but industrial production declined, highlighting the ongoing challenges faced by the manufacturing sector in Europe's biggest economy.
Exports rose by 1.8% in February compared with the previous month, data from the federal statistics office Destatis showed on Monday, following nil growth in January.
That marked the fastest growth since November and compared with a market forecast of a 1.5% increase. Imports rose by 0.7% on a calendar and seasonally adjusted basis compared with January.
Most German exports went to the United States, up 8.5% compared with January, as demand increased in anticipation of the tariffs.
The far-reaching tariffs announced by U.S. President Donald Trump last week will deal a major blow to German industry.
The U.S. was Germany's biggest trading partner in 2024, according to the statistics office, with 253 billion euros ($270 billion) worth of goods exchanged between them.
"Even if we don’t know whether the announced tariffs will be passed through entirely by companies or how U.S. demand will react per product on higher prices, it is clear that an export-oriented economy like Germany's will suffer from a trade war," said Carsten Brzeski, global head of macro at ING.
The German trade balance showed a surplus of 17.7 billion euros in February, up from 16.2 billion euros in January, but below the 22.6 billion euros surplus recorded in February of 2024.
Exports to EU countries rose by 0.5% on the month, while exports to third countries rose by 3.2%.
German industrial production fell more than expected in February by 1.3% compared to the previous month, the federal statistics office said on Monday.
Analysts polled by Reuters had predicted a 0.8% decline.
"Hopes of an upturn in industry are giving way to disillusionment," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
With the U.S. tariffs announced, there is little prospect of an early recovery in this sector, especially as competitive pressure from countries that also face higher barriers to the U.S. market will increase, de la Rubia said.
Compared with February 2024, production was 4% lower after adjustment for calendar effects. German industrial production remains about 10% below its pre-pandemic levels, some five years after the onset of COVID-19.
German industrial orders stagnated in February; data showed on Friday that demand remains weak.
Higher defense and infrastructure spending are still months away, so it looks likely that German industrial production will contract again in the coming months, said Franziska Palmas, senior Europe economist at Capital Economics.
"All of this means that after the fiscal U-turn optimism, the nearer-term outlook for the German economy has worsened once again," Brzeski said.
