By Reagan Steele – Business & Economic Policy Writer

The German economy, once a pillar of global stability, is now facing what leading economists are calling a dramatic period of decline. According to Clemens Fuest, head of the Munich-based ifo Institute, Germany’s long slide has hit a critical point.

“Germany has been in economic decline for years. The situation is now dramatic,” Fuest said in a recent interview. While government spending continues to rise, private investment is falling—a combination he warns threatens Germany’s long-term prosperity.

Fuest is calling for sweeping reforms: cutting back bureaucracy, eliminating costly subsidies, and opening the door to private enterprise. Without major change, Germany faces slower growth, lower tax revenues, and a continued drop in the average citizen’s standard of living.

California’s Place in the Picture

The United States maintains strong trade ties with Germany, and California alone exported over $6 billion in goods to the country last year—mostly in sectors like tech, chemicals, and agriculture. Germany is also California’s fifth-largest source of foreign direct investment, supporting tens of thousands of jobs across the state.

But with Germany’s economy stagnating and California climbing the global rankings, the numbers suggest it may be time to rethink certain assumptions. California now trails just behind Germany in global GDP—and the gap is narrowing.

Did We Bet on the Wrong Horse?

At the same time Germany stalls out, countries like Russia are posting growth. But the U.S. has sharply restricted trade with Russia, not just due to the Russia-Ukraine conflict but as part of a broader policy trend.

Today, the federal government maintains active sanctions against nearly half the countries in the world. That includes not only Russia, but dozens of economies across Latin America, Africa, the Middle East, and Asia. Critics argue that by limiting trade access on such a broad scale, Washington has reduced opportunities for American exporters—including in California.

With Germany now struggling, and much of the globe shut out by policy, some are asking whether the West backed the right partners—or simply closed too many doors.

“Sometimes, global strategy looks different in hindsight,” one state analyst noted. “Especially when the scoreboard changes.”

As California eyes the next chapter in its global economic playbook, the question isn’t just which countries we trade with—it’s which ones we still can.