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German inflation came in at 2.3% in March, preliminary data from the country’s statistics office Destatis showed Monday.
Economists polled by Reuters had forecast a 2.4% annual reading.
The data comes at a critical time for the German economy as U.S. President Donald Trump’s tariffs loom and fiscal and economic policy shifts at home could be imminent.

Customers shop for fresh fruits and vegetables in a supermarket in Munich, Germany, on March 8, 2025.
Michael Nguyen | Nurphoto | Getty Images

German inflation came in at a lower-than-expected 2.3% in March, preliminary data from the country’s statistics office Destatis showed Monday.
It compares to February’s 2.6% print, which was revised lower from a preliminary reading, and a poll of Reuters economists who had been expecting inflation to come in at 2.4% The print is harmonized across the euro area for comparability. 

On a monthly basis, harmonized inflation rose 0.4%. Core inflation, which excludes food and energy costs, came in at 2.5%, below February’s 2.7% reading.
Meanwhile services inflation, which had long been sticky, also eased to 3.4% in March, from 3.8% in the previous month.

A critical time for the economy

The data comes at a critical time for the German economy as U.S. President Donald Trump’s tariffs loom and fiscal and economic policy shifts at home could be imminent.
Trade is a key pillar for the German economy, making it more vulnerable to the uncertainty and quickly changing developments currently dominating global trade policy. A slew of levies from the U.S. are set to come into force this week, including 25% tariffs on imported cars — a sector that is key to Germany’s economy. The country’s political leaders and car industry heavyweights have slammed Trump’s plans.
How the trade conflict will impact inflation is however still unclear, Carsten Brzeski, global head of macro at ING noted Monday.

“The looming escalation of trade tensions and possible European retaliation to US tariffs could add to inflationary pressures in the short run,” he said.
“In the longer run, however, any trade war could also turn into a disinflationary force for Germany and the eurozone if growth were to weaken and companies potentially have to sell their increased inventories,” Brezeski said, noting that goods originally produced for the U.S. market could ultimately be sold in Europe at a reduced price point.
Meanwhile Germany’s political parties are working to establish a new coalition government following the results of the February 2025 federal election. Negotiations are underway between the Christian Democratic Union, alongside its sister party the Christian Social Union, and the Social Democratic Union.
While various points of contention appear to remain between the parties, their talks have already yielded some results. Earlier this month, Germany’s lawmakers voted in favor of a major fiscal package, which included amendments to long-standing debt rules to allow for higher defense spending and a 500-billion-euro ($541 billion) infrastructure fund.

ECB rate decision ahead

Monday’s inflation figures out of Germany, paired with recent data from other major euro zone countries such as Spain and France, suggests that euro zone headline inflation will likely have eased in March, Franziska Palmas, senior Europe economist at Capital Economics, suggested in a note.
French harmonized inflation was unchanged at 0.9% on an annual basis in March, lower than expected. In Spain, the reading fell sharply to 2.2%, down from 2.9% in the previous month and also lower than expected.
Euro zone inflation figures are due on Tuesday. Economists polled by Reuters were last forecasting the reading to come in at 2.3%.
“Germany’s figures, together with those from France, Italy and Spain, suggest that euro-zone headline inflation will probably come in at 2.2% in March, a bit below expectations,” Palmas said Monday. Core inflation is expected to be unchanged, or slightly lower than in February, she added.

“Services inflation probably also fell, which will please ECB officials,” she said, adding that “the chunky fall in Germany should more than offset the 0.1%-pt rises in France and Italy.”
“This increases the likelihood that the ECB cuts rates again in April, in line with our forecast, rather than pausing,” Palmas said.
Markets were last pricing in an around 91% chance of a 25-basis-point interest rate cut from the ECB on April 17, LSEG data showed. More

This article is an on-site version of our Swamp Notes newsletter. Premium subscribers can sign up here to get the newsletter delivered every Monday and Friday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersAs I wrote in my column today, we won’t know for sure what will happen on April 2 until Donald Trump’s so-called “liberation day” is here. But since my respondent today is London-based Tej Parikh, the FT’s economics leader writer, I thought I’d plunge into the topic of tariffs, and the transatlantic divide in how people tend to view them.In the US, public opinion around tariffs really depends on how you ask the question, as this New York Times’ graphic points out. If you ask whether Americans support tariffs “even if prices increase”, only about a third are in favour. But if you start calling out specific countries, like China, and pointing out specific unfair trade practices or differences in the rates charged by the US versus other countries, then suddenly the number who are in favour can rise above half the population.This is an important point to understand, not only because is it at the heart of the Trump administration’s economic thinking, but also because it resonates with average Americans. If it’s about “fairness” rather than “inflation”, views shift.As Stephen Miran, head of the President’s Council of Economic Advisers, wrote in his much talked about report, “A Users Guide to Restructuring the Global Trading System”, the current administration believes that it is unfairly locked into a system of tariff rates that are “designed for a different economic age”. As he points out, the US’s share of global GDP halved from 40 per cent in the 1960s to 21 per cent in 2012, and has recovered slightly to 26 per cent today — but the tariff and trade system is stuck in a postwar paradigm.According to Miran’s report, the US effective tariff on imports is the lowest of any nation in the world, at about 3 per cent. The EU’s effective rate is about 5 per cent and China’s is 10 per cent. Bilateral discrepancies can be larger. As Miran writes: “The US imposes only 2.5 per cent tariffs on auto imports from the EU, while Europe imposes a 10 per cent duty on American auto imports.”OK, so how to explain Trump’s 25 per cent across the board auto tariffs? How do they address the US-Europe discrepancy in particular?If you add in the fact that European companies — like carmakers — don’t pay VAT on goods for export, then you end up with a situation in which “a potential US tariff of 25 per cent on goods from Europe is not arbitrary, punitive, or merely a negotiating tactic”, as Jason Cummins, the chief US economist at Brevan Howard wrote in the FT last week, but rather “logically addresses inherent differences between tariff and VAT systems”. Cummins argues that 25 per cent is what it would take to level the playing field with Europe. Now, of course, none of this reflects all the challenges and potential inflation through complex supply chains that might result from tariffs (witness how all the carmakers, including the US ones, are complaining about that). But large industrial supply chains used to be vertically integrated (remember Henry Ford’s River Rouge plan, which had steel going in one side and cars coming out the other?)My bet is that they will be more so again in the future, for reasons that have little to do with geopolitics (additive manufacturing that allows complex products to be made locally is coming to scale, and a global price on carbon will argue for more regionalised hubs of production and consumption, since logistics is the second largest polluter after China).Meanwhile, if you put up on a white board the effective tariff rates of the US (3 per cent), EU (5 per cent) and China (10 per cent), and ask Americans if they think that’s fair, I’d wager they’d say no. I haven’t seen polling on this, but it follows the general trend that opinions on tariffs are reliant on how questions are posed. So, my question to you, Tej, as a European is, what would you say to that? Is there anything in this position that you can sympathise with? What would an average Briton say to such an argument? And if you were going to make the case about tariffs from the point of view of an average Briton to an American, how would you frame it?Recommended readingTej Parikh responds The use, and effects, of protectionism are so wide-ranging that it makes sense that support for it varies depending on which element is being emphasised — whether in America or Europe.In this case, it is difficult for individuals to assess the direct cost of import duties on themselves with the value they place on fairness. They don’t want to face higher prices. But they also think trade should be a level playing field.The questions will also have salience with different households. For instance, workers with experience of the economic disruption caused by globalisation — such as job losses and factory closures, triggered by competition from abroad — might find the fairness argument for raising tariffs more compelling. (Even perhaps to the extent that they’re willing to experience some short-term economic pain if it brings retribution.)This is what makes tariffs such a useful political tool. Their rationale can be targeted. And, politicians can get away with it, if the costs are manageable and not immediate. That’s where I think Trump’s April 2 bonanza will trip him up. High and wide tariffs will hit Americans’ pockets quickly.In Britain, controlling immigration rather than protecting certain jobs and industries with tariffs has been the more salient aspect of globalisation. But I imagine one could still garner support for import duties in parts of the country that have faced rapid deindustrialisation. (The same may be true in parts of Europe too, although the idea of open trade is more central to the European project).In coastal, rural and northern parts of England, the argument that tariffs would help block cheap competition from abroad, protect jobs and nurture industries, would land to some extent. But, in London, which has boomed, partly because of globalisation, it probably wouldn’t.The broader point here is that free trade is being made a scapegoat for deeper issues governments have failed to address, such as reskilling and investment support. But some of these “left behind” regions feel that promises to regenerate local areas always fall flat, and so if tariffs help at least some “old economy” jobs stay put, then some may think it is worth the punt.Your feedbackWe’d love to hear from you. You can email the team on swampnotes@ft.com, contact Ed on edward.luce@ft.com and Rana on rana.foroohar@ft.com, and follow them on X at @RanaForoohar and @EdwardGLuce. We may feature an excerpt of your response in the next newsletterRecommended newsletters for youTrade Secrets — A must-read on the changing face of international trade and globalisation. Sign up hereUnhedged — Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldSir Keir Starmer is braced for Donald Trump to hit Britain with new import taxes this week as part of his promised round of global reciprocal tariffs, in spite of “constructive” talks between the two leaders on Sunday.Downing Street conceded that British efforts to avoid punitive tariffs had not yet yielded results and that it expected “the UK to be impacted alongside other countries”.A spokesman for Starmer signalled that Britain would not immediately retaliate but would instead continue with a “calm and pragmatic approach” aimed at securing a new economic deal, covering tariffs.The spokesman said the talks were “likely to continue beyond Wednesday”, adding: “We will continue to have these talks for as long as there’s a chance of a deal with the US.”Starmer on Sunday held what Downing Street called “productive” trade negotiations with Trump, as he tries to put together “a UK/US economic prosperity deal”. The talks have been going on for several weeks and Downing Street said they would “continue at pace this week”.Trump on Sunday told reporters the tariffs he is expected to announce on April 2 would apply globally. “You’d start with all countries, so let’s see what happens,” he said. The US president has dubbed Wednesday “liberation day”.Asked whether Britain would hit back with its own tariffs, Starmer’s spokesman said the prime minister was “ruling nothing out” but that the emphasis was on talking and trying to secure a deal.“A trade war with the US is not in anyone’s interest,” Starmer’s spokesman said. “British industry wants to see the British government continue a dialogue with the US.”Starmer, who has had regular phone calls with Trump in recent weeks, has said that Britain will be “pragmatic and clear eyed” in its response if exports of UK-made cars and other goods are hit by US tariffs.Lord Peter Mandelson, Britain’s ambassador to Washington, is seeking to engineer an economic deal that would lead to Britain being given a carve-out from Trump’s threatened reciprocal global tariffs.British officials have spoken to the Trump team about scaling back or axing the UK’s digital services tax, which is set to raise £800mn this year and particularly affects big US tech companies.But the UK car industry told Sarah Jones, industry minister, on Friday that it did not want to see immediate UK retaliation if Trump pressed ahead with his threat of 25 per cent tariffs on foreign-made cars entering the US.“The industry does not want a trade war, but it’s important that we keep all options on the table,” Starmer said last week.Carmakers have instead demanded that ministers develop a “holistic approach” to supporting the UK auto industry, including through lower energy costs, increased training and better regulation. The independent Office for Budget Responsibility, the fiscal watchdog, has warned that Britain’s GDP will be 1 per cent lower next year in the event of the most “severe” global trade war.That would almost eliminate UK chancellor Rachel Reeves’ £9.9bn of headroom against her fiscal rules, announced last week in the Spring Statement, and increase the likelihood that she would have to raise taxes in an autumn Budget. More

Economic growth in the first quarter was just 0.3%, according to CNBC’s Rapid Update which tallied the forecasts of 14 economists.
The survey also shows Core PCE inflation will remain stuck at around 2.9% for most of the year.
The dour new forecasts come as the decline in consumer and business sentiment from the emerging trade war is showing up in real economic activity.

U.S. President Donald Trump speaks to members of the media aboard Air Force One before landing in West Palm Beach, Florida, U.S., March 28, 2025. 
Kevin Lamarque | Reuters

Policy uncertainty and new sweeping tariffs from the Trump administration are combining to create a stagflationary outlook for the U.S. economy in the latest CNBC Rapid Update.
The Rapid Update, averaging forecasts from 14 economists for GDP and inflation, sees first quarter growth registering an anemic 0.3% compared with the 2.3% reported in the fourth quarter of 2024. It would be the weakest growth since 2022 as the economy emerged from the pandemic.

Core PCE inflation, meanwhile, the Fed’s preferred inflation indicator, will remain stuck at around 2.9% for most of the year before resuming its decline in the fourth quarter.
Behind the dour GDP forecasts is new evidence that the decline in consumer and business sentiment is showing up in real economic activity. The Commerce Department on Friday reported that real, or inflation-adjusted consumer spending in February rose just 0.1%, after a decline of -0.6% in January. Action Economics dropped its outlook for spending growth to just 0.2% in this quarter from 4% in the fourth quarter.

Arrows pointing outwards

“Signs of slowing in hard activity data are becoming more convincing, following an earlier worsening in sentiment,” wrote Barclays over the weekend.
Another factor: a surge of imports (which subtract from GDP) that appear to have poured into the U.S. ahead of tariffs.
The good news is the import effect should abate and only two of the 12 economists surveyed see negative growth in Q1. None forecast consecutive quarters of economic contraction. Oxford Economics, which has the lowest Q1 estimate at -1.6%, expects a continued drag from imports but sees second quarter GDP rebounding to 1.9%, because those imports will eventually end up boosting growth when they are counted in inventory or sales measures.

Recession risks rising

On average, most economists forecast a gradual rebound, with second quarter GDP averaging 1.4%, third quarter at 1.6% and the final quarter of the year rising to 2%.
The danger is an economy with anemic growth of just 0.3% could easily slip into negative territory. And, with new tariffs set to come this week, not everyone is so sure about a rebound.
“While our baseline doesn’t show a decline in real GDP, given the mounting global trade war and DOGE cuts to jobs and funding, there is a good chance GDP will decline in the first and even the second quarters of this year,” said Mark Zandi of Moody’s Analytics. “And a recession will be likely if the president doesn’t begin backtracking on the tariffs by the third quarter.”
Moody’s looks for anemic Q1 growth of just 0.4% that rebounds to 1.6% by year end, which is still modestly below trend.

Arrows pointing outwards

Stubborn inflation will complicate the Fed’s ability to respond to flagging growth. Core PCE is expected at 2.8% this quarter, rising to 3% next quarter and staying roughly at that level until in drops to 2.6% a year from now.
While the market looks to be banking on rate cuts, the Fed could find them difficult to justify until inflation begins falling more convincingly at the end of the year. More

Goldman Sachs expects aggressive duties from the White House to raise inflation and unemployment and drag economic growth to a near-standstill.
In a note Sunday, the firm said “we continue to believe the risk from April 2 tariffs is greater than many market participants have previously assumed.”
The firm raised its forecast for inflation this year to 3.5%, cut its GDP outlook to just 1% and raised its unemployment view to 4.5%.

U.S. President Donald Trump announces that his administration has reached a deal with elite law firm Skadden, Arps, Slate, Meagher & Flom during a swearing-in ceremony in the Oval Office at the White House on March 28, 2025 in Washington, DC. 
Andrew Harnik | Getty Images

With decision day looming this week for President Donald Trump’s latest round of tariffs, Goldman Sachs expects aggressive duties from the White House to raise inflation and unemployment and drag economic growth to a near-standstill.
The investment bank now expects that tariff rates will jump 15 percentage points, its previous “risk-case” scenario that now appears more likely when Trump announces reciprocal tariffs on Wednesday. However, Goldman did note that product and country exclusions eventually will pull that increase down to 9 percentage points.

When the new trade moves are enacted, the Goldman economic team led by head of global investment research Jan Hatzius sees a broad, negative impact on the economy.
In a note published on Sunday, the firm said “we continue to believe the risk from April 2 tariffs is greater than many market participants have previously assumed.”
Inflation above goal
On inflation, the firm sees its preferred core measure, excluding food and energy prices, hitting 3.5% in 2025, a 0.5 percentage point increase from the prior forecast and well above the Federal Reserve’s 2% goal.
That in turn will come with weak economic growth: Just a 0.2% annualized growth rate in the first quarter and 1% for the full year when measured from the fourth quarter of 2024 to Q4 of 2025, down 0.5 percentage point from the prior forecast. In addition, the Wall Street firm now sees unemployment reaching 4.5%, a 0.3 percentage point raise from the previous forecast.
Taken together, Goldman now expects a 35% chance of recession in the next 12 months, up from 20% in the prior outlook.

The forecast paints a growing chance of a stagflation economy, with low growth and high inflation. The last time the U.S. saw stagflation was in the late 1970s and early ’80s. Back then, the Paul Volcker-led Fed dramatically raised interest rates, sending the economy into recession as the central bank chose fighting inflation over supporting economic growth.
Three rate cuts
Goldman’s economists do not see that being the case this time. In fact, the firm now expects the Fed to cut its benchmark rate three times this year, assuming quarter percentage point increments, up from a previous projection of two rate cuts.
“We have pulled the lone 2026 cut in our Fed forecast forward into 2025 and now expect three consecutive cuts this year in July, September, and November, which would leave our terminal rate forecast unchanged at 3.5%-3.75%,” the Goldman economists said, referring to the fed funds rate, down from 4.25% to 4.50% today.
Though the extent of the latest tariffs is still not known, the Wall Street Journal reported Sunday that Trump is pushing his team toward more aggressive levies that could mean an across-the-board hit of 20% to U.S. trading partners.
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