What is the right course of action now?

Your answer is correct because German traffic rules require that you must not overtake a tram that has stopped to let passengers on or off when there is no protective island for boarding. According to § 20 of the Straßenverkehrs-Ordnung (StVO), if passengers need to cross the lane where your vehicle is traveling, you must slow down to walking speed and be prepared to stop. This ensures passenger safety as they step on or off the tram directly into or from the traffic lane. Overtaking the tram in this situation—either on the right or left—would endanger passengers crossing the road and is therefore prohibited. Always prioritize pedestrian safety near tram stops without boarding islands by not passing the tram until it resumes driving.