German exports and imports both fell in July as surging prices and the war in Ukraine threaten to send Europe’s largest economy into a recession. 

The trade surplus shrank to 5.4 billion euros ($5.4 billion) from 6.2 billion euros in June, as exports dropped by 2.1% and imports by 1.5%, Germany’s statistics office said Friday. Goods sales to the US, the country’s biggest market, fell by almost 14%. 

“Trade is no longer a growth driver but has become a drag on German growth,” Carsten Brzeski, an economist at ING, said in a report to clients. “Global supply-chain frictions, geopolitical risks and rising production costs are the obvious drivers behind this new trend.” 

While the logistical problems that have plagued manufacturers since the pandemic are showing signs of easing, low water levels in rivers, high energy costs and possible shifts in supply chains and production processes leave a mixed outlook, according to Brzeski.