A COLLAPSE in exports pushed Europe’s largest economy to the brink of recession in the second quarter.

In a sign that an increasingly hostile trade war between the United States and China is at least partially to blame for Germany’s deepening manufacturing malaise, shipments abroad declined 1.3 percent, causing a contraction in total economic output — the second over the past year.

The Bundesbank predicts GDP could decline again in the third quarter and sliding business confidence has been piling pressure to Chancellor Angela Merkel to provide fiscal stimulus.

Germany’s export-oriented economy has sustained significant collateral damage from a U.S.-inflicted trade conflict that continues to escalate and could hit closer to home before long. U.S. President Donald Trump threatened to impose tariffs on European car imports earlier this month and labeled the EU “worse than China.”

In an attempt to defuse tensions, Merkel said Monday she wants the bloc to start trade talks with the United States.

Net trade subtracted 0.5 percentage point from total output, more than offsetting gains in private as well as government consumption. Construction shrank after strong growth at the start of the year, investment contracted slightly in the second quarter.

German firms have blamed geopolitical uncertainty and trade for a weaker outlook. Many firms have highlighted difficulties in predicting earnings prospects.

Adding to the challenge, weakness in manufacturing is starting to spread into other industries, according to Clemens Fuest, president of the country’s Ifo institute. The think tank’s closely watched business confidence indicator slid to the weakest level in almost seven years in August, with measures for both current conditions and expectations deteriorating.

The economy’s disappointing run has amplified calls for fiscal stimulus. While the finance ministry is studying options — to be deployed in case the crisis worsens — so far, the government has defended its policy of a balanced budget.

With private spending still relatively robust thanks to a solid labor market, the Bundesbank has also cautioned against any knee-jerk reactions to a downturn driven by external demand and following years of strong growth.

Jens Weidmann, the institution’s president, insisted over the weekend that “there’s no reason to panic.” He also sought to lower expectations for a big package of measures from the European Central Bank, arguing against a new round of quantitative easing. (SD-Agencies)