Donald Trump wants to “make America great again.” This can also come at Germany’s expense. Reuters
The German Economic Institute (IW) calculates that Donald Trump’s re-election as US President could have serious consequences for the economy and prosperity in Germany. Trump’s announced tariffs could cost the German economy over 120 billion euros and 1.2 percentage points of economic growth. That is more than the current German growth potential. Germany is threatened with a prolonged recession. The IW experts recommend countermeasures.
A re-election of Donald Trump as US President could be expensive for the German economy and result in noticeable losses in prosperity. This is the result of calculations by the Cologne Institute of German Economics (IW). If re-elected, the former US president has threatened tariffs of 60 percent or more on Chinese products as well as flat-rate tariffs of 10 percent on all goods imported into the US. Over a four-year term, this could mean a loss of more than 120 billion euros for the German economy, write the IW economists.
The researchers took into account both the direct consequences of tariffs on products from Germany and the indirect consequences for German companies if the trade conflict with China intensifies. In a second scenario, they therefore calculated the costs if China retaliated with its own tariff increases on US imports.
Then the billions in damages would also increase for Germany, writes the employer-related IW. A trade conflict would dampen global trade and exports and private investments would decline in Germany. This would harm Germany and the EU more than the USA.
Even in the mild scenario – in which China does not respond with its own tariffs – the gross domestic product for Germany will be 1.2 percent lower in 2028. Since German growth potential is currently seen by economists as barely exceeding one percent, Trump’s re-election would have the potential , pushing Germany into a prolonged recession.
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A re-election of Trump would also deal a further blow to the World Trade Organization (WTO), writes the IW. The tariff increases announced by Trump would clearly violate international trade rules. The EU’s relations with the USA are also likely to suffer. First, old trade disputes that have largely been resolved by the current US administration could flare up again, for example in steel and aluminum. Trump could also repeal the Biden administration’s cooperative measures that weaken protectionist elements of the US Inflation Reduction Act (IRA) for EU exporters.
As a consequence, the IW experts recommend using the time until another possible Trump presidency to enter into agreements with the USA on steel and critical raw materials. A threat of countermeasures could also help in an emergency. The EU also needs new free trade agreements with other countries and regions such as Australia, the South American Mercosur states, Indonesia and India. The US elections are coming up in November.
Note on Method: The IW simulated the effects of US tariff increases using the Global Economic Model from Oxford Economics. Two scenarios were analyzed: The first scenario assumes an increase in US tariffs on all imports from trading partners to ten percent and an increase to 60 percent of the average US tariffs on Chinese imports. The second scenario assumes an identical increase as in scenario 1 and also calculates a 40 percentage point increase in Chinese tariffs on US imports.
With material from dpa.
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