The Impact of the U.S. Inflation Reduction Act (IRA) on the German Economy

The impact of the IRA on the U.S. domestic economy is controversial. Empirical studies on the impact of the IRA on trading partners, especially Germany, are not available. Descriptive statistics show that the United States is an important market for German products, especially in the automotive, machinery, and pharmaceutical industries. Possible counter-reactions by the German government or the European Union should be viewed with caution in light of the threat of a subsidy race with negative consequences for all parties involved.