Germany could face two more years of recession if a trade war with the United States escalates sharply, the central bank said Friday, a bleak warning for Europe's struggling top economy.

If US President Donald Trump's tariffs were to be implemented in full from July and the EU were to retaliate, then German output would decline 0.5 percent this year and 0.2 percent in 2026, the Bundesbank forecast.

This would be due to a "marked decline in exports and significant uncertainty weighing on investment," it said.

There would be a return to growth in 2027, with a rebound of one percent, it said.

The eurozone's traditional growth engine has already contracted for the past two years due to a manufacturing slump and surging energy prices after Russia invaded Ukraine, but hopes had been high for

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