A Move Away from Global Supply Chains Would Reduce German GDP by 10 Percent
Relocating international production back to Germany would reduce German economic output by almost 10 percent, finds a study in ifo Schnelldienst. “Bringing outsourced portions of value added back to Germany would mean that less competitive activities suddenly gain large shares in the mix of German value added. The associated drop in productivity would weaken the country’s economic performance,” says Lisandra Flach, Director of the ifo Center for International Economics and coauthor of the study.
These results are based on calculations of the ifo trade model. “Our calculations assume that no other country will pursue a similar strategy or impose retaliatory tariffs in response, and so the negative effects of supply chain nationalization might turn out to be even higher,” Flach says.
“If there were a global trend toward reshoring supply chains, the stakes for the German economy would indeed be very high. Production of intermediate goods in Germany for subsequent processing abroad contributes more than USD 600 billion to German value added,” says ifo researcher Andreas Baur.
Publication (in German)
Strategien gegen die Flaschenhals-Rezession: Was hilft bei Lieferengpässen und steigenden Preisen
ifo Institut, München, 2022
ifo Schnelldienst, 2022, 75, Nr. 01, 03-31
