The German economy is the third largest in the world and accounted for around one quarter (24 percent) of the European Union’s GDP in 2024. Germany was also the United States’ largest European trading partner and the seventh-largest market for U.S. exports in 2024. Its “social market” economy largely follows market principles, but with a considerable degree of government regulation and wide-ranging social welfare programs.

With a population of 83.6 million in 2024, Germany is the largest consumer market in the European Union. The significance of the German marketplace goes well beyond its borders. Germany is home to some of the world’s largest trade shows, such as Medica, Hannover Fair, Automechanika, and the ITB tourism show, which play a significant role in facilitating trade. The volume of trade, number of consumers, and Germany’s geographic location at the center of the European Union make it a key market in which many U.S. firms seek to build their European and worldwide expansion strategies.

Germany’s economy is expected to stagnate in 2025 after two years of contraction, as trade tensions and global uncertainty continue to weigh on exports and investment. Private consumption should see a modest recovery, supported by lower inflation and rising real incomes, while investment remains subdued due to tight financing and weak sentiment. Growth is projected to rebound to 1.1% in 2026, driven by stronger domestic demand and a gradual recovery in investment.

Political Environment: Visit the State Department’s website for background on Germany’s political and economic environment