2 weeks Ago
The German economy has been plagued with economic (and now political ) problems in the last few years, and analysts expect that to worsen under President-elect Donald Trump. The self-proclaimed “ tariff man ” has repeatedly affirmed plans to impose additional levies of 10-20% across the board and has made no secret of targeting the likes of Germany. “They don’t take our cars.
They don’t take our farm products. They sell millions and millions of cars in the United States. No, no, no, they are going to have to pay a big price,” Trump said at a rally last week , in reference to European countries.
Germany, Europe’s largest economy and one of America’s largest trading partners in the region, exported twice as much to the U.S. as it imported, thanks to Germany’s manufacturing prowess .
However, Trump has a problem with that disparity and wants to remedy it. Analysts expect Trump’s tariff plan to hit Germany particularly hard, with its GDP shrinking 0.6% as a direct result of the tariffs.
“While the 10% across-the-board tariff is a clear risk, our baseline expectation is that Trump imposes a more limited set of tariffs on Europe, including on autos-related imports worth $80bn, worth 0.9% of EU exports,” Goldman Sachs analysts wrote in a note Wednesday. The analysis assumes that European countries, which collectively form the U.
S.’s biggest trading partner, will impose retaliatory tariffs of the same level. Other studies make similar predictions.
IW, a German economic institute, expects the German GDP to slide by 1.5% in the next two to three years. The ifo economic institute predicts economic damage to the tune of €33 billion in Germany under the Trump administration’s proposed measures.
This won’t be Trump’s first time targeting the European superpower. During his first term as president, he reportedly called Germany “ very bad ” for selling America millions of cars and widening a trade deficit. He ruffled feathers with then-Chancellor Angela Merkel.
Aggravated trade tensions are the last thing Germany needs right now. While the country is a force to be reckoned with in the region, it’s on the verge of economic decay, impacting its biggest industries as well as political turmoil that’s caused its government to break down. German Chancellor Olaf Scholz congratulated Trump on his victory on Wednesday and hoped the two countries could continue to remain “close friends.
” Shares in Germany’s flagship carmakers fell after Trump was officially declared the winner. BMW’s CEO Oliver Zipse is still confident that the company will thrive under a Trump-imposed tariff regime since it’s making more of its cars in the U.S.
, but he seems to be in the minority. To be sure, Germany won’t be alone in facing economic damage under Trump. Italy and Switzerland could also struggle if the president-elect’s plan goes through, which will ultimately make European goods more expensive for the American consumer.
Goldman Sachs analysts anticipate that the uncertainty surrounding trade policy will affect growth even more than the tariffs themselves. For instance, they lowered the U.K.
’s growth expectation for 2025 from 1.6% to 1.4%.
For its part, Europe seems to be bracing for Trump 2.0 by finding avenues to strike a deal on exports. The region may have to impose further protective measures to prevent too much of a blow to industries like automobiles, which are the most exposed to U.
S. trade. “We must be prepared for the U.
S. to distance itself further from open, global cooperation,” Lisandra Flach, director of the ifo Center for International Economics, said . “Germany and the EU must now strengthen their position through measures of their own.
”.
