Trump's Trade Strategies Impact: Germany Experiences Slight Economic Decline during Q2 - Trump's customs policy impact: German economy experiences minimal decline in Q2
In a recent development, a trade agreement between the European Union (EU) and the United States has been announced, imposing a 15% tariff on most EU imports. This agreement, while avoiding the threatened 30% tariffs initially proposed by former President Donald Trump, still raises tariffs significantly above the previous average of 4.8%.
The German economy, a major part of the EU's industrial exports, is exposed to these new tariffs. Key sectors such as steel, aluminum, and possibly pharmaceuticals could face significant disruptions due to the increased tariff regime. This could hamper German exports to the US, reduce competitiveness, and lead to economic challenges in export-dependent industries.
Helena Melnikov, the CEO of the German Industry and Commerce Chamber, has once again pointed to bureaucracy, high location costs, and lengthy approval processes as "noticeable growth brakes" in Germany. The new tariff regime adds to these challenges, creating ongoing uncertainty.
Despite these concerns, the German economy has shown signs of resilience. Production and business sentiment in the manufacturing sector have developed positively, and private and public consumption have increased. Dirk Schumacher, chief economist of KfW Bank, and analyst Swonke of DZ Bank expect higher state spending to provide an impetus for the winter half-year in Germany.
Thomas Theobald, a macroeconomic expert at the Institute for Macroeconomic and Economic Research (IMK) of the Hans-Boeckler-Foundation, asserts that the trade negotiations between the EU and the US will not hinder the economic recovery in Germany.
The US position highlights the deal as a strategic victory for American trade policy, aimed at correcting trade imbalances, encouraging reshoring, and protecting domestic industries. This rhetoric potentially disadvantages EU countries, particularly Germany, by implying pressure on European producers, including German exporters, to "contribute their fair share" via tariffs.
In summary, the new trade agreement marks a shift from previous transatlantic trade relations and signals a more protectionist stance by the US. This could affect Germany's export-driven economy, with the 15% tariff on most EU exports potentially slowing export growth and industrial performance. However, the German economy remains resilient, with signs of recovery and plans for increased state investments expected to make a "decisive contribution" to a stronger recovery.
- The 15% tariff on most EU exports, as a result of the trade agreement, could adversely impact employment policy in export-dependent industries within EC countries, such as Germany, by reducing competitiveness and causing economic challenges.
- The US's assertion that the trade agreement is a strategic victory for American trade policy and a means to protect domestic industries might increase pressure on European producers, including German exporters, to contribute more via tariffs, potentially affecting their employment policies.
