German Economic Contraction Raises Concerns for Spanish Industry, Particularly in the Basque Country

Germany's economy has experienced a notable contraction, shrinking by 0.3% in the second quarter of 2025. This decline is attributed to US tariffs hindering German exports, which subsequently casts a shadow over Spain's industrial sector, especially within the Basque Country, a region historically linked to Germany through its industrial exports.

The repercussions of a slowing German economy are significant for Spain, particularly as the country relies on German industries for trade and economic stability. The Basque Country, with its robust industrial base, is particularly vulnerable to changes in demand due to its export-oriented economy. As the tariffs imposed by the US limit the ability of German manufacturers to compete globally, the slowdown could lead to decreased imports from Germany to Spain, affecting production and job stability in the Basque region.

With German exports suffering, industries in Spain, particularly those aligned with manufacturing and heavy industry, may face uncertainties. This situation demands urgent attention from economic policymakers as they evaluate strategies to mitigate the fallout from Germany’s downturn. Spanish companies are beginning to express concerns about future orders and overall market conditions, fearing a prolonged period of instability could ensue if Germany's economic problems persist.

Economic analysts warn that the implications of this downturn stretch beyond immediate impacts, suggesting that long-term recovery strategies in both countries will be critical. This sentiment was echoed by industry leaders, who noted the increasing nervousness regarding supply chains and the interconnected nature of today’s economies. Unless there is a significant turnaround in German economic performance, the Basque Country and broader Spanish industry may need to brace for a challenging period ahead.