Conflict with Trump: customs dispute and no end: exports to the US

Uncertainty about tariffs, constant threats of Donald Trump and no end in sight: the customs dispute with the USA, including the extended period, becomes a serious burden for Germany’s exporters.

In May, exports to the United States, the most important trading partner for German companies, fell to the lowest level for more than three years, as can be seen from data from the Federal Statistical Office. Exports fell by 7.7 percent to the previous month to 12.1 billion euros and ensured the second decline in German exports in a row.

“The situation in foreign trade is dramatic and threatens to further tighten,” says Dirk Jandura, President of the BGA export association. “The consequences of Trump’s customs policy are becoming increasingly clear.”

And the fear of US tariffs has no end: On Monday evening, President Trump postponed the deadline for new tariffs from this Wednesday (July 9) to August 1st and announced high premiums, especially for Asian countries, including Japan, South Korea and Malaysia. This runs the customs dispute, and even August 1st is not binding according to Trump’s statement.

“The EU did not get a new customs letter from the White House yesterday, but the risk (further) tariffs hovers like a sword of Damocles over German and European exporters,” says Ing chief economist Carsten Brezski.

Is a deal with the USA in the customs dispute?

The German exporters who had benefited from early deliveries to the USA in the first quarter have now finally arrived in difficult times. The entire exports worldwide fell by 1.4 percent in May compared to April to 129.4 billion euros.

There was already a clear minus in April. “Now the advanced effects of the first quarter are moving into their opposite,” says Thomas Gitzel, chief economist of Liechtensteiner VP Bank.

At the beginning of April, Trump announced his huge global customs package – only to suspend large parts of it after violent stock exchange turmoil for 90 days. Since then, a base tariff of 10 percent has been on EU imports, while Trump in the meantime threatened tariffs of 50 percent if the negotiations with Brussels have not reached an agreement.

Trump has already introduced high extra oils of 25 percent on the import of cars and auto parts, even 50 percent of steel and aluminum.

What exactly the new period means for the EU until the beginning of August was initially unclear. Negotiations in the customs dispute continued, the EU Commission said. Only on Sunday commission president Ursula von der Leyen made a phone call. However, it is unlikely that it is possible to clear the US tariffs completely.

The Foreign Trade Association BGA penetrates “finally creating unity and security through an agreement”. However, there should be no deal at all costs, confirms President Jandura.

Backing up also in the China business

But the German exporters not only fight with Trump’s customs policy, the China business is also going downhill: exports to the People’s Republic fell by 2.9 percent to 6.8 billion euros in May. China has become a hard competition from a cheap workbench for German companies – for example in electric cars.

The German exports to the United Kingdom, on the other hand, rose by a good 15 percent to 7.2 billion euros, while the important exports to the EU countries shrank by 2.2 percent to 71.3 billion euros.

Cloudy prospects for German economy

Imports to Germany also weakened significantly. In May, they fell by 3.8 percent to 111.1 billion euros for the previous month. “The severe decline in imports could be interpreted as a weakness of the internal economy,” says the chief economist of the Hamburg Commercial Bank, Cyrus de la Rubia.

In view of the weak foreign trade, the German economy threatens the recession again after the surprisingly strong growth of 0.4 percent in the first quarter. From the perspective of ING chef economist Brezski, German exporters are confronted with violent headwind – also because of the strong euro, which is more expensive to export on the world markets. “After the hard data for the first two months of the second quarter, it looks like the German economy is being stagnated again or even shrinking slightly.”