Germany Must Prepare for Trump Tariffs

According the ifo Institute, Donald Trump’s economic course will pose major problems for Germany and the European Union. “Trump is pursuing a distinctly protectionist agenda based on higher import tariffs and greater restrictions on international trade, particularly for China and potentially also Europe,” says ifo President Clemens Fuest, and recommends taking appropriate precautions.

German exporters, for whom the US is the largest sales market outside the EU, must expect severe losses if Trump makes good on his threat to impose basic tariffs of 20 percent on US imports from all trading partners and 60 percent on imports from China. These measures by the re-elected US President would mean considerable economic damage of EUR 33 billion in Germany alone. The ifo Institute estimates that German exports to the US could fall by around 15 percent as a result. In addition, exports to China would fall by 10 percent, as China’s exports to the US would drop massively.

“We must be prepared for the US to distance itself further from open, global cooperation,” warns Lisandra Flach, Director of the ifo Center for International Economics. “Germany and the EU must now strengthen their position through measures of their own. These include deeper integration of the EU services market and credible retaliatory measures against the US,” she recommends. For example, the Anti-Coercion Instrument newly created by the EU could be used. In addition to tariffs, it provides for further countermeasures in the event of economic coercion. Germany and the EU could also strengthen cooperation with individual US states.