20% tariffs could cause Germany’s GDP to fall by 1.5%, IW says US GDP decline was larger than initially, but has since improved – IW tariffs could cause Germany’s exports to the US to fall by 14.9%, IFO survey Germany’s industrial strength is a potential source of weakness inWASHINGTON, Oct 24 (Reuters) – If President Donald Trump’s inauguration sparks a tit-for-tat trade war between the United States and Europe, Germany will be the big loser. Germany’s once enviable industrial strength could potentially become a serious vulnerability.
Former Republican President Donald Trump imposed blanket tariffs of 10% to 20% on virtually all imported goods and more than 60% tariffs on products from China as a measure to revitalize the U.S. manufacturing industry. He has floated plans to impose
In a scenario in which the Trump administration imposes 20% tariffs on the EU and the EU retaliates in kind, the eurozone’s GDP would rise in 2027 and 2028, according to a report by the German economic research institute IW (exclusively provided to Reuters). It fell by 1.3%, with the largest decline of 1.5% in Germany.
The negative impact on EU GDP will increase from 2025 to 2028, while the US GDP impact will be even larger in the first two years, with a 10% tariff increasing GDP by 1.3% in 2025 and a tariff of 20%. % decrease by 1.5%. Research found.
Because U.S. imports would decline more than exports in this scenario, the impact on U.S. GDP would decrease over time, leading to an increasingly positive impact on the U.S. trade balance.
Germany, Europe’s biggest economy, will become the only G7 country to fail to grow for the second year in a row this year, according to the International Monetary Fund’s latest forecasts. Trade tensions with the United States, a major trading partner, will have a major impact on production.
Jacob Funk Kierkegaard, a senior research fellow at Bruegel University, said: “Germany will not be saved by China’s growth recovery, given my view that China’s stimulus package will be disappointing.” Ta. The Peterson Institute for International Economics told Reuters.
“If the United States becomes more protectionist, there will be very few short-term sources of growth for Germany,” Kierkegaard said.
China was number one for eight consecutive years, but this year the United States overtook China to become Germany’s largest trading partner. “Half of Germany’s growth has always come from exports, and if you look at what’s happening in the world, you have to say this.” That pillar is under attack,” Germany’s Economy Minister Robert Habeck said. He said this when announcing the government’s economic forecast in early October.
A blow to new industries
German exports will contract by 0.3% in 2023 due to weak global demand and geopolitical tensions. The government is forecasting negative growth of 0.1% this year.
According to a study by the Hans Baechler Stiftung Institute for Macroeconomic Research, 20% tariffs could reduce German production by 1 percentage point in the first two years.
According to a study by the Ifo Institute, Germany’s overall exports to China could decline by nearly 9.6% if a trade war between the United States and China occurs.
According to a study by Ifo, Germany’s exports to the US could fall by 14.9% if the US imposed tariffs of 60% on Chinese products and 20% on products from other countries.
Germany’s car exports will be particularly hard hit, with a 32% decline, and pharmaceutical exports will also fall by 35%, according to Ifo.
This would be another blow to German industry, another pillar of Germany’s economic model. The industry has been in a slump for years, with no recovery in sight.
“Proposed tariffs on international goods could be a major blow to manufacturing and exacerbate the hardships of an already fragile industrial base,” said Neil, Partner and Co-Head of Weill’s London Restructuring practice.・Mr. Devaney stated.
Jürgen Matthes, head of international economic policy at the IW, said that even if the tariffs were only 10%, the German economy would suffer because of the uncertainty they would create.
“One of the main problems in the economy right now is that investment is weak and people are spending less because they feel uncertain,” Mattes told Reuters. Ta.
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Report by Maria Martinez. Editing: Mark John and Toby Chopra
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