More than a third of German companies are planning job cuts in 2025, according to a new survey by the German Economic Institute (IW) obtained by Reuters.

The findings come as unemployment in Europe’s largest economy nears the three million mark—a level not seen in a decade. While the service sector offers a glimmer of hope, industrial and construction companies remain especially pessimistic, the survey of over 2,000 businesses revealed.

Germany has been struggling to regain economic momentum, standing out as the only G7 nation that has failed to grow over the past two years. With new tariffs announced by U.S. President Donald Trump looming, analysts fear the country may enter its third consecutive year of recession—a historic first for post-war Germany.

Though the tariffs weren't in effect when the survey was conducted, the export environment was already deteriorating.

“Donald Trump's whims come at an inopportune time and pose a serious challenge for the German economy,” said Michael Groemling, IW’s head of macroeconomics.

The outlook has been grim since fall 2023, when pessimism among businesses began to outweigh optimism. By the end of 2024, expectations had hit their lowest point since the 2008 global financial crisis.

While sentiment has slightly improved this spring, the overall outlook remains bleak. More than a third of companies expect to scale back investment in 2025 compared to the previous year, the survey noted. Photo by Kiefer. from Frankfurt, Germany, Wikimedia commons.