Germany is the European economy most at risk if President-elect Donald Trump ultimately decides to impose 10% tariffs on European products. The locomotive of Europe fears that this measure will cost it 1% of its growth, at a time when the country’s economy is not at all buoyant.
This warning was issued by the President of the Bundesbank himself, Joachim Nagel, in an interview with the weekly Time: “If the tariff plans are implemented, it could cost us 1% of economic output. This is very painful given that our economy will not grow at all this year and probably less than 1% per year to come, even before the implementation of the American tariff plan. “If the new taxes are actually imposed, we could even fall into negative territory,” he said.
As the political analyst and former correspondent of the Washington Post in Madrid, Tom Burns, during an event organized by the Proa Comunicación agency: “Germany must start moving forward, it is behind and Trump’s victory is not good for it. We are witnessing a decline progressive in Europe.”
This decline is reflected precisely in Germany’s poor economic performance. The German government’s Advisory Council, commonly known as the Five Wise Men, recently revised Germany’s growth downward, forecasting an economic recession of 0.1% this year and a meager growth of 0.4% for the year next. Taking these figures into account, if the 10% tariffs were implemented and paying attention to what Olaf Scholz said, Germany would face another much deeper recession in 2025, i.e. -0.6 %.
It is true that Nagel is much more optimistic than “the five wise men”, since in his own words, he does not consider at all the probability of a recession this year. A little less than a month ago, the Shcolz government hoped that in 2025 Germany would enter the realm of recovery, with growth of 1.1%, after growth of between zero and 0.1%. at the end of this year.
Even if the president-elect of the United States will concentrate all his efforts on controlling China’s commercial power and on decoupling the American economy from the Asian giant as much as possible, the objective of his economic program is to decouple the American economy as much as possible of globalization and make it more protectionist and self-sufficient. The universal tariff of 10% that he wants to impose directly affects the Old Continent, one of the main trading partners of the United States.
Germany is the economy most exposed to US tariffs. Mainly because its growth is based on exports. Last year alone, it exported 157.7 billion euros worth of goods across the Atlantic, according to Eurostat data. This is a wide margin compared to the next countries, namely Italy and Ireland, which exported goods worth 67.3 billion and 51.6 billion euros respectively. These three countries alone account for 55% of total EU exports to the US, which they added to last year. 502.3 billion euros. This represents a fifth of all non-EU exports and 90% of the bloc’s transatlantic sales.
Concretely, the sectors most affected would be machines and vehicles (8,207.6 billion euros), chemicals (137.4 billion euros) and other manufactured products (103.7 billion euros).
Uncertainty hangs over Germany. The economy is very affected due to an uncompetitive industrial sector which makes growth practically zero. High energy costs are weighing on the sector, while global demand is very weak and competition with China is very tough. In automobile manufacturing, the main pillar of the German economy, the Asian giant is gaining enormous ground with electric vehicles. Also with component manufacturing.
Last week, the manufacturing production data for September was an unpleasant surprise. Figures published by Destatis show that it fell 4.6% year-on-year and 2.5% compared to the previous month.
But all this does not come from now. According to the President of the Government Advisory Council, Monika Schnitzer, she assured that “negligence in politics and economics in recent years and decades” is what has caused Europe’s locomotive economy to “remain stagnant.
On the other hand, experts reaffirm in the report that the recovery of the global economy does not translate into an increase in exports. This for an economy whose growth is based on foreign trade Since it’s German, it’s fatal. Likewise, the icing on the cake is brought by consumers who, despite the fact that real wages have experienced significant growth in 2023 and 2024, domestic consumption “has increased slightly”, they say.
“The weakness of the industry and the length of the weak phase suggest that the German economy is being held back by structural and cyclical problems,” Schnitzer said.
We need another government
Added to this type of German economic crisis is political uncertainty. Finally, the fall of the traffic light coalition led Chancellor Olaf Scholz to agree with the Social Democrats and the opposition (CDU) to organize early elections on February 23.
But many professional associations, particularly in the industrial sector, have already urged the Social Democratic Chancellor to speed up the process of early elections, the first since 2005. The president of the German Federation of Wholesale, Export and Trade services, Dirk Jandura said in a statement that every day that passes with this coalition government “is a day wasted”.
The business leader assured that the country is “stuck” in the middle of a structural change in the economy and “at the same time, the poles of the economy are realigning between the United States and China”.
Germany and the European Union now find themselves at a crossroads, following every step that Donald Trump intends to take upon his arrival in the White House, while seeking a way to be more competitive in the new world order that seems to be looming. will end once the Republican takes office in January.
