10.11.2024, Berlin.
The growth of Germany’s economy will be weakened if the newly elected US President Donald Trump fulfills his campaign promises, stated Michael Hüther, Director of the German Economic Institute (IW), in an interview with newspapers from the Funke media group on November 10.
“If President-elect Trump fulfills his threats and imposes a 10% tariff on imports from all trading partners and a 60% tariff on imports from China, it will significantly impact the export-oriented German economy,” said Hüther.
According to the expert, such tariff increases could reduce Germany’s GDP by approximately 0.3% next year and up to 1.2% in the following years. Hüther is convinced that even if the EU takes countermeasures within the framework of a trade dispute, the negative effect on GDP will be evident by 2028.
“The USA has been Germany’s most important trading partner for the past nine years. It will be nearly impossible to fill this gap through domestic and European consumption alone,” explained the head of IW.
Hüther believes that the tariff hikes will particularly impact export-intensive sectors such as mechanical engineering, automotive, and pharmaceuticals, as they have higher-than-average export quotas to the U.S.
“Tariffs will increase the cost of imported goods to the USA, making them less competitive compared to domestic products. As a result, the already weak German economy will suffer significantly,” the economist said.
At the same time, the director of the economic institute noted that high US tariffs against China will increase pressure on Chinese imports into Europe, which could positively affect price dynamics in Germany.
“We should not expect a sharp rise in prices as long as energy prices remain stable. On the contrary, if the threatened tariff hikes are implemented, our calculations indicate that inflation could slightly decrease,” Hüther stated.
